UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to § 240.14a-12
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PSYCHIATRIC SOLUTIONS, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies: Common stock, par
value $.01 per share, of Psychiatric Solutions, Inc. (Common Stock).
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(2)
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Aggregate number of securities to which transaction applies:
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55,922,050 shares of Common Stock
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1,316,477 shares of restricted Common Stock
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6,447,308 options to purchase shares of Common Stock
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(3)
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Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and
state how it was determined): The filing fee was determined based upon the sum of (A)
the product of the sum of (i) 55,922,050 shares of Common Stock
and (ii) 1,316,477 shares
of restricted Common Stock multiplied by the merger consideration of $33.75 per share,
and (B) options to purchase 5,120,007 shares of Common Stock (only includes the options
with an exercise price less than $33.75 per share) multiplied by $10.33 (which is the
difference between $33.75 and the weighted average exercise price of $23.42 per share).
The filing fee was calculated by multiplying 0.0000713 by the sum of the amounts
calculated pursuant to clauses (A) and (B) of the preceding sentence.
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(4)
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Proposed maximum aggregate value of transaction:
$1,984,689,959
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(5)
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Total fee paid: $141,508
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the date of its filing.
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(1)
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Amount previously paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing party:
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(4)
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Date filed:
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6640 CAROTHERS PARKWAY
SUITE 500
FRANKLIN, TENNESSEE 37067
[ ],
2010
TO OUR STOCKHOLDERS:
On May 16, 2010, Psychiatric Solutions, Inc., a Delaware
corporation (the Company), entered into an Agreement
and Plan of Merger (the merger agreement) with
Universal Health Services, Inc., a Delaware corporation
(UHS), and Olympus Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of UHS (Merger
Sub). Under the terms of the merger agreement, Merger Sub
will be merged with and into the Company, with the Company
continuing as the surviving corporation and a wholly-owned
subsidiary of UHS (the merger). If the merger is
completed, you will be entitled to receive $33.75 in cash,
without interest and less any applicable withholding taxes, for
each share of the Companys common stock that you own as of
the effective time of the merger.
A special meeting of our stockholders will be held on
[ ], 2010, at [ ]
[ ].m. (Central Time) to vote on a proposal to
adopt the merger agreement so that the merger can occur. The
special meeting will be held at our executive offices located at
6640 Carothers Parkway, Suite 500, Franklin, Tennessee
37067. Notice of the special meeting and the related proxy
statement is enclosed.
The accompanying proxy statement gives you detailed information
about the special meeting and the merger, and includes the
merger agreement as Annex A. The receipt of cash in
exchange for shares of the Companys common stock in the
merger will constitute a taxable transaction to
U.S. persons for U.S. federal income tax purposes. We
encourage you to read the proxy statement and the merger
agreement carefully.
Our board of directors has determined that the merger is
advisable and that the terms of the merger are fair to and in
the best interests of the Company and its stockholders, and
approved the merger agreement and the transactions contemplated
thereby, including the merger. This recommendation is based, in
part, upon the unanimous recommendation of the special committee
of the board of directors consisting of four independent and
disinterested directors.
Your vote is very important.
We cannot
complete the merger unless holders of a majority of all
outstanding shares of the Companys common stock entitled
to vote on the matter vote to adopt the merger agreement.
Our
board of directors recommends that you vote FOR the
proposal to adopt the merger agreement. The failure of any
stockholder to vote on the proposal to adopt the merger
agreement will have the same effect as a vote against the
adoption of the merger agreement.
Whether or not you plan to attend the special meeting, please
complete, date, sign and return, as promptly as possible, the
enclosed proxy in the accompanying reply envelope, or submit
your proxy by telephone or the Internet. Stockholders who attend
the meeting may revoke their proxies and vote in person.
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Sincerely,
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Christopher Grant, Jr.
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Joey A. Jacobs
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Chairman of the Special Committee of the Board of
Directors
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Chairman of the Board, President and Chief Executive
Officer
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Neither the Securities and Exchange Commission nor any state
securities regulatory agency has approved or disapproved the
merger, passed upon the merits or fairness of the merger or
passed upon the adequacy or accuracy of the disclosure in this
document. Any representation to the contrary is a criminal
offense.
The proxy statement is dated [ ], 2010, and is
first being mailed to stockholders on or about
[ ], 2010.
6640 CAROTHERS PARKWAY
SUITE 500
FRANKLIN, TENNESSEE 37067
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
TO BE HELD ON
[ ], 2010
TO OUR STOCKHOLDERS:
PLEASE TAKE NOTICE that a special meeting of stockholders of
Psychiatric Solutions, Inc., a Delaware corporation (the
Company), will be held on [ ],
2010, at [ ] [ ].m. (Central
Time), at our executive offices located at 6640 Carothers
Parkway, Suite 500, Franklin, Tennessee 37067, for the
following purposes:
(1) To consider and vote on a proposal to adopt the
Agreement and Plan of Merger (the merger agreement),
dated as of May 16, 2010, by and among the Company,
Universal Health Services, Inc., a Delaware corporation
(UHS), and Olympus Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of UHS (Merger
Sub), as the merger agreement may be amended from time to
time;
(2) To approve the adjournment of the special meeting, if
necessary or appropriate, to solicit additional proxies if there
are insufficient votes at the time of the special meeting to
adopt the merger agreement; and
(3) To act upon other business as may properly come before
the special meeting and any and all adjourned or postponed
sessions thereof.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE STOCKHOLDER MEETING TO BE HELD ON [ ],
2010.
The
Companys Proxy Statement and form of proxy card are
available at
http://www.psysolutions.com.
The record date for the determination of stockholders entitled
to notice of and to vote at the special meeting is
[ ], 2010. Accordingly, only stockholders of
record as of the close of business on that date will be entitled
to notice of and to vote at the special meeting or any
adjournment or postponement thereof. A list of our stockholders
entitled to vote at the special meeting will be available at our
principal executive offices located at 6640 Carothers Parkway,
Suite 500, Franklin, Tennessee 37067, during ordinary
business hours for ten days prior to the special meeting.
We urge you to read the accompanying proxy statement carefully
as it sets forth details of the proposed merger and other
important information related to the merger.
Your vote is important, regardless of the number of shares of
the Companys common stock you own. The adoption of the
merger agreement requires the affirmative approval of the
holders of a majority of the outstanding shares of the
Companys common stock entitled to vote thereon. The
adjournment proposal requires the affirmative vote of a majority
of the shares of the Companys common stock present at the
special meeting and entitled to vote thereon. Even if you plan
to attend the special meeting in person, we request that you
complete, sign, date and return the enclosed proxy or submit
your proxy by telephone or the Internet prior to the special
meeting and thus ensure that your shares will be represented at
the special meeting if you are unable to attend. If you fail to
return your proxy card or fail to submit your proxy by telephone
or the Internet and do not attend the special meeting in person,
your shares will not be counted for purposes of determining
whether a quorum is present at the meeting and will have the
same effect as a vote against the adoption of the merger
agreement, but will not affect the outcome of the vote regarding
the adjournment proposal.
Please note that space limitations make it necessary to limit
attendance at the special meeting to stockholders. Registration
will begin at [ ] [ ].m.
(Central Time). If you attend, please note that you may be asked
to present valid picture identification. Street name
holders will need to bring a copy of a brokerage statement
reflecting stock ownership as of the record date. Cameras,
recording devices and other electronic devices will not be
permitted at the special meeting. To obtain directions to attend
the special meeting and vote in person, please contact Brent
Turner, our Executive Vice President, Finance and
Administration, by mail at 6640 Carothers Parkway,
Suite 500, Franklin, Tennessee 37067, or by phone at
(615) 312-5700.
Stockholders of the Company who do not vote in favor of the
adoption of the merger agreement will have the right to seek
appraisal of the fair value of their shares of the
Companys common stock if they deliver a demand for
appraisal before the vote is taken on the merger agreement and
comply with all requirements of Delaware law, which are
summarized in the accompanying proxy statement.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE
COMPLETE, DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE
ENCLOSED PROXY IN THE ACCOMPANYING REPLY ENVELOPE, OR SUBMIT
YOUR PROXY BY TELEPHONE OR THE INTERNET. STOCKHOLDERS WHO ATTEND
THE MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON.
By Order of the Board of Directors,
Joey A. Jacobs
Chairman, President and Chief Executive Officer
Franklin, Tennessee
[ ], 2010
TABLE OF
CONTENTS
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1
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6
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11
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A-1
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B-1
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C-1
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ii
References to the Company, we,
our or us in this proxy statement refer
to Psychiatric Solutions, Inc. and its subsidiaries unless
otherwise indicated by context.
SUMMARY
This Summary, together with the Questions and Answers
About the Special Meeting and the Merger, summarizes the
material information in this proxy statement. You should
carefully read this entire proxy statement and the other
documents to which this proxy statement refers you for a more
complete understanding of the matters being considered at the
special meeting. See Where You Can Find More
Information beginning on page 68.
The Parties to the Merger (see
page 12).
Psychiatric Solutions, Inc., a
Delaware corporation, offers an extensive continuum of
behavioral health programs to critically ill children,
adolescents and adults and is the largest operator of owned or
leased freestanding psychiatric inpatient facilities with more
than 11,000 beds in 32 states, Puerto Rico and the
U.S. Virgin Islands. We also manage freestanding
psychiatric inpatient facilities for government agencies and
psychiatric inpatient units within medical/surgical hospitals
owned by others. Universal Health Services, Inc., a Delaware
corporation (UHS), is one of the nations
largest hospital companies operating, through its subsidiaries,
acute care hospitals, behavioral health care facilities and
ambulatory centers located throughout the United States and
Puerto Rico. UHS also acts as the advisor to Universal Health
Realty Income Trust, a real estate investment trust whose stock
is publicly traded on the New York Stock Exchange (the
NYSE). Olympus Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of UHS (Merger
Sub), was formed solely for the purpose of completing the
proposed merger (as defined below). Merger Sub has not engaged
in any business except as contemplated by the merger agreement
(as defined below).
The Merger (see page 16).
You are being
asked to vote to adopt an agreement and plan of merger (the
merger agreement) providing for Merger Sub to be
merged with and into the Company (the merger), with
the Company continuing as the surviving corporation and a
wholly-owned subsidiary of UHS (the surviving
corporation). As a result of the merger, the Company will
cease to be an independent, publicly-traded company. See
The Merger Agreement beginning on page 46.
Merger Consideration (see page 46).
If
the merger is completed, you will be entitled to receive $33.75
in cash, without interest and less any applicable withholding
taxes, for each share of the Companys common stock, par
value $.01 per share (the Common Stock), that you
own as of the effective time of the merger. See The Merger
Agreement Merger Consideration beginning on
page 46.
Treatment of Outstanding Options and Restricted Common Stock
(see page 46)
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merger, all outstanding options to acquire Common Stock will
become fully vested and exercisable (to the extent not already
vested and exercisable) and will be cancelled and converted into
the right to receive a cash payment equal to the number of
shares of Common Stock underlying the option multiplied by the
amount (if any) by which $33.75 exceeds the applicable option
exercise price, without interest and less any applicable
withholding taxes. Additionally, upon consummation of the
merger, each outstanding share of restricted Common Stock will
become fully vested and transferable and cancelled and converted
into the right to receive $33.75 in cash, without interest and
less any applicable withholding taxes. See The
Merger Interests of the Companys Directors and
Executive Officers in the Merger and The Merger
Agreement Treatment of Options and Other
Awards beginning on pages 37 and 46, respectively.
Restrictions on Solicitations of Other Offers (see
page 51).
The merger agreement provides that
from and after the date of the merger agreement until the
effective time of the merger or, if earlier, the termination of
the merger agreement, we are generally not permitted to:
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solicit, initiate or knowingly encourage any inquiries or the
implementation or submission of any acquisition proposal, or
participate in discussions or negotiations regarding, or furnish
to any person any non-public information in connection with, any
acquisition proposal; or
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withhold, withdraw or modify, in a manner adverse to UHS or
Merger Sub, the recommendation of our board of directors that
the stockholders adopt the merger agreement, approve or
recommend any acquisition proposal, or approve or recommend, or
cause us or any of our subsidiaries to enter into, any letter of
intent, merger agreement, acquisition agreement or similar
agreement with respect to any acquisition proposal.
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Notwithstanding these restrictions, prior to the adoption of the
merger agreement by our stockholders, under certain
circumstances, our board of directors (acting through the
special committee or otherwise) may respond to an unsolicited
written proposal for an alternative acquisition or terminate the
merger agreement and enter into an acquisition agreement with
respect to a superior proposal, so long as the Company complies
with certain terms of the merger agreement described under
The Merger Agreement Recommendation
Withdrawal/Termination in Connection with a Superior
Proposal, beginning on page 52, including, if
required, paying a termination fee.
Conditions to the Merger (see
page 54).
The consummation of the merger
depends on the satisfaction or waiver of a number of conditions,
including, among others, the following:
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the merger agreement must have been adopted by the affirmative
vote of the holders of a majority of the outstanding shares of
Common Stock;
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no governmental authority will have enacted, issued,
promulgated, enforced or entered any law or taken any other
action after the date of the merger agreement which is in effect
and has the effect of restraining, enjoining or otherwise
prohibiting the consummation of the merger;
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any waiting period (and any extension thereof) applicable to the
consummation of the merger under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the HSR
Act), will have expired or been terminated;
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the Companys, UHS and Merger Subs respective
representations and warranties in the merger agreement must be
true and correct as of the closing date in the manner described
under the caption The Merger Agreement
Conditions to the Merger beginning on
page 54; and
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the Company, UHS and Merger Sub must have performed the
obligations that each is required to perform under the merger
agreement in the manner described under the caption The
Merger Agreement Conditions to the Merger
beginning on page 54.
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Termination of the Merger Agreement (see
page 55).
The merger agreement may be
terminated:
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by mutual written consent of the Company and UHS;
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by either the Company or UHS if:
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the merger is not completed on or before December 31, 2010,
provided that such right will not be available to any party
whose failure to fulfill any material obligation under the
merger agreement has been the cause of, or resulted in, the
failure of the closing to occur on or before such date;
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if any governmental authority will have enacted, issued,
promulgated, enforced or entered any law or taken any other
action permanently restraining, enjoining or otherwise
prohibiting the consummation of the merger, and such law or
action will have become final and nonappealable; provided that
such right will not be available to any party whose failure to
fulfill any material obligation under the merger agreement has
been the principal cause of such action; or
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our stockholders do not adopt the merger agreement at the
special meeting or any adjournment or postponement thereof;
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our board of directors or any committee of our board of
directors (i) withholds, withdraws or modifies, in a manner
adverse to UHS or Merger Sub, its recommendation that our
stockholders adopt the merger agreement; (ii) approves or
recommends to our stockholders an acquisition proposal
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for us from a third party; or (iii) approves or recommends,
or causes or permits us or any of our subsidiaries to enter
into, any letter of intent, merger agreement, acquisition
agreement or similar agreement with respect to an acquisition
proposal from a third party, or will have publicly proposed to
effect the foregoing;
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we have materially breached our agreements and covenants related
to the solicitation or receipt of acquisition proposals from
third parties; or
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we have breached any of our representations or warranties, or
failed to perform our covenants or agreements set forth in the
merger agreement, which breach or failure to perform would give
rise to the failure of a certain condition to closing and is
incapable of being cured prior to December 31, 2010,
provided that neither UHS nor Merger Sub is then in material
breach of any of its representations, warranties, agreements or
covenants under the merger agreement;
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prior to our stockholders adoption of the merger agreement
at the special meeting or any adjournment thereof, our board of
directors (acting through the special committee or otherwise)
determines in good faith that a written acquisition proposal for
us from a third party is a superior proposal and that the
failure to terminate the merger agreement would be inconsistent
with its fiduciary duties; provided that we have complied with
our obligations under the merger agreement described under
The Merger Agreement Restrictions on
Solicitations of Other Offers and The Merger
Agreement Recommendation Withdrawal/Termination in
Connection with a Superior Proposal beginning on pages 51
and 52, respectively, and provided that we have paid the
termination fee owed to UHS as described under The Merger
Agreement Termination Fee beginning on
page 56; or
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UHS or Merger Sub has breached any of its representations or
warranties, or failed to perform any of its agreements or
covenants under the merger agreement, which breach or failure to
perform would give rise to the failure of a certain condition to
closing and where such breach or failure to perform is incapable
of being cured prior to December 31, 2010, provided that we
are not in material breach of any of our representations,
warranties, agreements or covenants under the merger agreement.
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Termination Fee (see page 56).
The
Company will be obligated to pay a termination fee of
$71.5 million as directed by UHS if the merger agreement is
terminated under certain circumstances (including the
termination of the merger agreement due to a superior proposal).
In certain other circumstances, we will be obligated to pay all
of the expenses of UHS incurred in connection with the
transactions contemplated by the merger agreement (which would
be credited against the termination fee to the extent it
subsequently becomes due). The payment to UHS or its designees
of the termination fee
and/or
reimbursement of UHS expenses will be the sole and
exclusive remedy of UHS for any loss suffered by UHS or Merger
Sub as a result of the failure of the merger to be consummated
and upon such payment, we will not have any further liability or
obligation relating to or arising out of the merger agreement
(except in the case of fraud or a breach by the Company of the
merger agreement). See the circumstances in which we are
required to pay a termination fee or reimburse expenses in
The Merger Agreement Termination Fee
beginning on page 56.
Specific Performance; Remedies (see
page 58).
The parties to the merger
agreement will be entitled to enforce any provision of the
merger agreement by a decree of specific performance and to
temporary, preliminary and permanent injunctive relief to
prevent breaches or threatened breaches of any of the provisions
of the merger agreement without posting any bond or other
undertaking.
The Special Meeting (see page 13).
The
special meeting will be held on [ ], 2010 at
[ ] [ ].m. (Central Time), at
the Companys executive offices located at 6640 Carothers
Parkway, Franklin, Tennessee 37067. At the special meeting, you
will be asked to vote on the proposal to adopt the merger
agreement and, if necessary, the proposal to adjourn the special
meeting to solicit additional proxies. See Questions and
Answers About the Special Meeting and the Merger beginning
on page 6 and The Special Meeting beginning on
page 13.
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The Special Committee and its Recommendation (see
page 23).
The special committee is a
committee of our board of directors that was formed on
March 4, 2010 for the purpose of evaluating, accepting or
rejecting strategic alternatives available to the Company,
including a possible transaction relating to the sale of the
Company and any alternative thereto. The special committee is
comprised of four independent and disinterested directors. The
members of the special committee are Christopher Grant, Jr.
(Chair), David M. Dill, Richard D. Gore and Edward K. Wissing.
The special committee unanimously determined that the merger
agreement and the transactions contemplated thereby, including
the merger, are fair to and in the best interests of the Company
and our stockholders, recommended to our board of directors that
the merger and the merger agreement be approved and declared
advisable by our board of directors, and that our board of
directors submit the merger agreement to our stockholders and
recommend that our stockholders adopt the merger agreement. For
a discussion of the material factors considered by the special
committee in reaching its conclusions, see The
Merger Reasons for the Merger; Recommendation of the
Special Committee and of Our Board of Directors beginning
on page 23.
Board Recommendation (see page 25).
The
Companys board of directors, acting upon the unanimous
recommendation of the special committee, recommends that the
Companys stockholders vote FOR the adoption of
the merger agreement, and FOR the adjournment of the
special meeting, if necessary, to solicit additional proxies.
For a discussion of the material factors considered by the board
of directors in reaching its conclusions, see The
Merger Reasons for the Merger; Recommendation of the
Special Committee and of Our Board of Directors beginning
on page 23.
Shares Owned by Our Directors and Executive Officers
(see page 14).
As of [ ],
2010, the record date, our directors and executive officers held
and were entitled to vote, in the aggregate, shares of Common
Stock representing approximately [ ]% of the
outstanding shares of Common Stock. See The Special
Meeting Shares Owned by Our Directors and
Executive Officers beginning on page 14.
Interests of Our Directors and Executive Officers in the
Merger (see page 37).
In considering the
proposed merger, you should be aware that some of our directors
and executive officers have interests in the merger that are
different from, or in addition to, the interests of our
stockholders generally. These interests include, among other
things, the treatment of shares (including shares of restricted
Common Stock) and options held by the directors and executive
officers, as well as indemnification and insurance arrangements
with executive officers and directors and change in control
severance benefits that may become payable to certain executive
officers and employees. These interests are more fully
described, together with a more detailed description of the
total cash payments our directors and executive officers will
receive in connection with the merger, under The
Merger Interests of the Companys Directors and
Executive Officers in the Merger beginning on page 37.
Opinion of Goldman, Sachs & Co. as Financial
Advisor to the Special Committee (see page 26)
.
Goldman, Sachs & Co. (Goldman Sachs)
rendered its oral opinion to the special committee (subsequently
confirmed in writing) to the effect that, as of May 16,
2010 and based upon and subject to the factors and assumptions
set forth in its written opinion, the per share merger
consideration to be paid to the holders of shares of Common
Stock (other than UHS and its affiliates) pursuant to the merger
agreement was fair from a financial point of view to those
holders.
The full text of the written opinion of Goldman Sachs, dated
May 16, 2010, which sets forth the assumptions made,
procedures followed, matters considered and limitations on the
review undertaken in connection with the opinion, is attached as
Annex B to this proxy statement. Goldman Sachs provided its
opinion for the information and assistance of the special
committee in connection with its consideration of the merger.
The Goldman Sachs opinion does not constitute a recommendation
as to how any holder of Common Stock should vote with respect to
the merger or any other matter. Pursuant to an engagement letter
between the Company and Goldman Sachs, the Company has agreed to
pay Goldman Sachs a fee of approximately $20 million for
its services in connection the transaction, the principal
portion of which is contingent upon consummation of the
transaction.
Financing of the Merger (see
page 36).
The consummation of the merger is
not conditioned on the receipt of financing by UHS. Funding of
the debt financing is subject to the satisfaction of the
conditions set forth in the commitment letter pursuant to which
the financing will be provided. The debt financing will
4
provide the necessary financing for the merger, including the
payment of related transaction costs, charges, fees and
expenses. On May 16, 2010, UHS entered into a financing
commitment letter with JPMorgan Chase Bank, N.A.
(JPMorgan), Deutsche Bank Securities Inc.,
J.P. Morgan Securities Inc. and Deutsche Bank AG New York
Branch (Deutsche Bank), pursuant to which JPMorgan
and Deutsche Bank have, taken together, committed to provide the
financing necessary to consummate the merger and to refinance
certain existing indebtedness. See The Merger
Financing of the Merger beginning on page 36.
Regulatory Approvals (see page 35).
Under
the HSR Act and related rules, the merger may not be completed
until notification and report forms have been filed with the
Federal Trade Commission (FTC) and the Antitrust
Division of the Department of Justice (DOJ) and the
applicable waiting period has expired or been terminated. The
Company and UHS filed their respective notification and report
forms under the HSR Act with the FTC and the Antitrust Division
of the DOJ on May 28, 2010. After discussions with the FTC,
UHS withdrew its notification and report form effective as of
June 25, 2010, and refiled on June 28, 2010.
Though not a condition to the consummation of the merger,
U.S. federal and state laws and regulations may require
that we or UHS obtain approvals, consents or certificates of
need from, file new license
and/or
permit applications with,
and/or
provide notice to applicable governmental authorities in
connection with the merger. See The Merger
Agreement Efforts to Complete the Merger,
beginning on page 53, for information on the obligations of
the parties under the merger agreement to obtain the regulatory
approvals required to consummate the merger.
U.S. Federal Income Tax Consequences (see
page 43).
If you are a U.S. Holder (as
defined below), the merger will be a taxable transaction for
U.S. federal income tax purposes under the Internal Revenue
Code of 1986, as amended (the Code). Your receipt of
cash in exchange for your shares of Common Stock in the merger
generally will cause you to recognize gain or loss measured by
the difference, if any, between the amount of cash you receive
in the merger (determined before the deduction of any applicable
withholding taxes) and your adjusted tax basis in your shares of
Common Stock. If you are a
Non-U.S. Holder
(as defined below), any gain realized on your receipt of cash in
the merger generally will not be subject to U.S. federal
income tax unless you have certain connections to the United
States. Because of the complexities of the tax laws, we advise
you to consult your personal tax advisors concerning the
applicable U.S. federal, state, local, foreign and other
tax consequences of the merger to you. See Material
U.S. Federal Income Tax Consequences of the Merger to Our
Stockholders beginning on page 43.
Appraisal Rights (see page 60).
Under
Delaware law, holders of Common Stock who do not vote in favor
of adopting the merger agreement will have the right to seek
appraisal of the fair value of their shares, as determined by
the Delaware Court of Chancery, if the merger is completed, but
only if they comply with all requirements of Delaware law, which
are summarized in this proxy statement. The appraisal amount you
would receive could be more than, the same as or less than the
amount a stockholder would be entitled to receive under the
terms of the merger agreement. Any holder of Common Stock
intending to exercise his, her or its appraisal rights must,
among other things, submit a written demand for an appraisal to
us prior to the stockholder vote on the adoption of the merger
agreement and must not vote or otherwise submit a proxy in favor
of adoption of the merger agreement. Your failure to follow
exactly the procedures specified under Delaware law will result
in the loss of your appraisal rights. See The Special
Meeting Rights of Stockholders Who Object to the
Merger and Appraisal Rights beginning on
pages 14 and 60, respectively, and the text of the Delaware
appraisal rights statute reproduced in its entirety as
Annex C to this proxy statement.
Market Price of Common Stock (see
page 63).
The closing sale price of Common
Stock on The NASDAQ Global Select Market (the
NASDAQ) on May 14, 2010, the last trading day
prior to the announcement of the execution of the merger
agreement, was $32.63 per share. On March 9, 2010, which
was the last trading day prior to the day we publicly announced
that we had been approached by third parties in connection with
a potential acquisition of the Company, the closing price of our
common stock was $23.91 per share. The $33.75 per share to
be paid for each share of Common Stock in the merger represents
a premium of approximately 41.15% to the closing price on
March 9, 2010. See Market Price and Dividend
Data beginning on page 63.
5
QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The following questions and answers are intended to address
briefly some commonly asked questions regarding the merger, the
merger agreement and the special meeting. These questions and
answers do not address all questions that may be important to
you as a stockholder of the Company. Please refer to the
Summary and the more detailed information contained
elsewhere in this proxy statement, the annexes to this proxy
statement and the documents referred to in this proxy statement,
which you should read carefully.
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Q:
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What is the proposed transaction?
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A:
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The proposed transaction is the acquisition of the Company by
UHS pursuant to the merger agreement. Once the merger agreement
has been adopted by the stockholders and the other closing
conditions under the merger agreement have been satisfied or
waived, Merger Sub, a wholly-owned subsidiary of UHS, will merge
with and into the Company. The Company will be the surviving
corporation and become a wholly-owned subsidiary of UHS.
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Q:
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What will I receive in the merger?
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A:
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Upon completion of the merger, you will be entitled to receive
$33.75 in cash, without interest and less any applicable
withholding taxes, in exchange for each share of Common Stock
that you own at the effective time of the merger, unless you
have exercised your appraisal rights with respect to the merger.
For example, if you own 100 shares of Common Stock at the
effective time of the merger, you will receive $3,375.00 in cash
in exchange for your shares of Common Stock, less any applicable
withholding taxes. You will not own any shares in the surviving
corporation.
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Q:
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When and where is the special meeting?
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A:
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The special meeting of stockholders of the Company will be held
on [ ], 2010, at [ ]
[ ].m. (Central Time), at the Companys
executive offices located at 6640 Carothers Parkway,
Suite 500, Franklin, Tennessee 37067.
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Q:
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What matters will be voted on at the special meeting?
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A:
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You will be asked to consider and vote on the following
proposals:
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to adopt the merger agreement;
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to approve the adjournment of the special meeting,
if necessary or appropriate, to solicit additional proxies if
there are insufficient votes at the time of the meeting to adopt
the merger agreement; and
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to act upon other business that may properly come
before the special meeting or any adjournment or postponement
thereof.
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Q:
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How does the Companys board of directors recommend that
I vote on the proposals?
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A:
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The Companys board of directors recommends that you vote:
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FOR the proposal to adopt the merger
agreement; and
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FOR the adjournment proposal, if
necessary or appropriate, to solicit additional proxies if there
are insufficient votes at the time of the special meeting to
adopt the merger agreement.
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You should read The Merger Reasons for the
Merger; Recommendation of the Special Committee and our Board of
Directors beginning on page 23 for a discussion of
the factors that the special committee and the board of
directors considered in deciding to recommend the adoption of
the merger agreement. In considering the proposed merger, you
should be aware that some of our directors and executive
officers have interests in the merger that are different from,
or in addition to, the interests of our stockholders generally.
See The Merger Interests of the Companys
Directors and Executive Officers in the Merger beginning
on page 37.
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6
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Q:
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What effects will the proposed merger have on the Company?
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A:
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As a result of the proposed merger, the Company will cease to be
an independent, publicly-traded company and will become a
wholly-owned subsidiary of UHS. Upon the consummation of the
merger, you will no longer have any interest as a stockholder in
our future earnings or growth. Following consummation of the
merger, the registration of our Common Stock and our reporting
obligations with respect to the Common Stock under the
Securities Exchange Act of 1934, as amended (the Exchange
Act), will be terminated upon application to the
Securities and Exchange Commission (the SEC). In
addition, upon completion of the proposed merger, shares of the
Common Stock will no longer be listed on any stock exchange or
quotation system, including the NASDAQ.
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Q:
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What happens if the merger is not consummated?
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A:
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If the merger agreement is not adopted by our stockholders or if
the merger is not completed for any other reason, our
stockholders will not receive any payment for their shares in
connection with the merger. Instead, the Company will remain an
independent public company and the Common Stock will continue to
be listed and traded on the NASDAQ. Under specified
circumstances, the Company may be required to pay UHS a
termination fee and/or reimburse UHS for its
out-of-pocket
expenses. See The Merger Agreement Termination
Fee beginning on page 56.
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Q:
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Who is entitled to vote at the special meeting?
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A:
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All holders of Common Stock are entitled to notice, but only
stockholders of record holding Common Stock as of the close of
business on [ ], 2010, the record date for the
special meeting, are entitled to vote at the special meeting. As
of the record date, there were approximately
[ ] shares of Common Stock outstanding.
Approximately [ ] holders of record held such
shares. Every holder of Common Stock is entitled to one vote for
each such share the stockholder held as of the record date.
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Please note that space limitations make it necessary to limit
attendance at the special meeting to stockholders. Registration
will begin at [ ] [ ].m.
(Central Time). If you attend, please note that you may be asked
to present valid picture identification. Street name
holders will need to bring a copy of a brokerage statement
reflecting stock ownership as of the record date. Cameras,
recording devices and other electronic devices are not permitted
at the meeting.
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Q:
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What vote is required for our stockholders to adopt the
merger agreement?
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A:
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An affirmative vote of the holders of a majority of all
outstanding shares of Common Stock entitled to vote on the
matter is required to adopt the merger agreement.
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Q:
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What vote is required for our stockholders to approve a
proposal to adjourn the special meeting, if necessary or
appropriate, to solicit additional proxies?
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A:
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The proposal to adjourn the special meeting, if necessary or
appropriate, to solicit additional proxies requires the
affirmative vote of the holders of a majority of the shares of
Common Stock present or represented by proxy at the meeting and
entitled to vote on the matter.
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Q:
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Who is soliciting my vote?
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A:
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This proxy solicitation is being made and paid for by us. In
addition, we have retained Innisfree M&A Incorporated
(Innisfree) to assist in the solicitation. We will
pay Innisfree approximately $50,000, plus
out-of-pocket
expenses, for its assistance. Our directors, officers and
employees also may solicit proxies by personal interview, mail,
e-mail,
telephone, facsimile or by other means of communication. These
persons will not be paid additional remuneration for their
efforts. We also will request brokers and other fiduciaries to
forward proxy solicitation material to the beneficial owners of
shares of Common Stock that the brokers and fiduciaries hold of
record. We will reimburse them for their reasonable
out-of-pocket
expenses.
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7
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Q:
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What do I need to do now?
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A:
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Even if you plan to attend the special meeting, after carefully
reading and considering the information contained in this proxy
statement, if you hold your shares in your own name as the
stockholder of record, please vote your shares by completing,
signing, dating and returning the enclosed proxy card; using the
telephone number printed on the enclosed proxy card; or using
the Internet voting instructions printed on the enclosed proxy
card. You also can attend the special meeting and vote, or
change your prior vote, in person.
Do NOT enclose or return
your stock certificate(s) with your proxy.
If you hold your
shares in street name through a broker, bank or
other nominee, then you received this proxy statement from the
nominee, along with the nominees proxy card which includes
voting instructions and instructions on how to change your vote.
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Q:
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How do I vote? How can I revoke my vote?
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A:
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You may vote by signing and dating each proxy card you receive
and returning it in the enclosed prepaid envelope or as
described below if you hold your shares in street
name. If you return your signed proxy card, but do not
mark the boxes showing how you wish to vote, your shares will be
voted FOR the proposal to adopt the merger agreement
and FOR the adjournment proposal. You have the right
to revoke your proxy at any time before the vote taken at the
special meeting through one of the following ways:
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if you hold your shares in your name as a
stockholder of record, by notifying our Executive Vice
President, General Counsel and Secretary, Christopher L. Howard,
at 6640 Carothers Parkway, Suite 500, Franklin, Tennessee
37067;
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by attending the special meeting and voting in
person (your attendance at the meeting will not, by itself,
revoke your proxy; you must vote in person at the meeting);
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by submitting a later-dated proxy card; or
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if you have instructed a broker, bank or other
nominee to vote your shares, by following the directions
received from your broker, bank or other nominee to change those
instructions.
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Q:
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Can I vote by telephone or electronically?
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A:
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If you hold your shares in your name as a stockholder of record,
you may vote by telephone or electronically through the Internet
by following the instructions included with your proxy card.
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If your shares are held by your broker, bank or other nominee,
often referred to as held in street name, please
check your proxy card or contact your broker, bank or nominee to
determine whether you will be able to vote by telephone or
electronically.
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Q:
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If my shares are held in street name by my
broker, bank or other nominee, will my broker, bank or other
nominee vote my shares for me?
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A:
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Your broker, bank or other nominee will only be permitted to
vote your shares if you instruct your broker, bank or other
nominee how to vote. You should follow the procedures provided
by your broker, bank or other nominee regarding the voting of
your shares. If you do not instruct your broker, bank or other
nominee to vote your shares, your shares will not be voted and
the effect will be the same as a vote against the adoption of
the merger agreement and will not have an effect on the proposal
to adjourn the special meeting.
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Q:
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What do I do if I receive more than one proxy or set of
voting instructions?
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A:
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If your shares are held in street name by your
broker, bank or other nominee and directly by you as a record
holder, you may receive more than one proxy and/or set of voting
instructions relating to the special meeting. Please be sure to
vote using each proxy card and/or voting instruction form you
receive by telephone or the Internet or by signing and returning
each proxy card and/or voting instruction card separately in the
envelopes provided, in order to ensure that all of your shares
are voted.
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8
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Q:
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How are votes counted?
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A:
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For the proposal to adopt the merger agreement, you may vote
FOR, AGAINST or ABSTAIN. Abstentions will not be counted as
votes cast or shares voting on the proposal to adopt the merger
agreement, but will count for the purpose of determining whether
a quorum is present. If you abstain, it will have the same
effect as if you vote AGAINST the adoption of the merger
agreement. In addition, if your shares are held in the name of a
broker, bank or other nominee, your broker, bank or other
nominee will not be entitled to vote your shares in the absence
of specific instructions. These non-voted shares, or
broker non-votes, will be counted for purposes of
determining a quorum, but will have the same effect as a vote
AGAINST the adoption of the merger agreement.
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For a proposal to adjourn the special meeting, if necessary or
appropriate, to solicit additional proxies, you may vote FOR,
AGAINST or ABSTAIN. Abstentions and broker non-votes will count
for the purpose of determining whether a quorum is present, but
abstentions and broker non-votes will not count as shares
present and entitled to vote on the proposal to adjourn the
meeting. As a result, abstentions and broker non-votes will have
no effect on the vote to adjourn the meeting, which requires the
vote of the holders of a majority of the shares of Common Stock
present or represented by proxy at the meeting and entitled to
vote on the matter.
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If you sign your proxy card without indicating your vote, your
shares will be voted FOR the adoption of the merger
agreement and FOR the adjournment of the special
meeting, if necessary, to solicit additional proxies, and in
accordance with the recommendations of our board of directors on
any other matters properly brought before the special meeting
for a vote.
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Q:
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Who will count the votes?
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A:
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A representative of our transfer agent, StockTrans, Inc., will
count the votes and act as an inspector of election. Questions
concerning stock certificates or other matters pertaining to
your shares may be directed to StockTrans, Inc. at
(800) 733-1121.
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Q:
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What happens if I sell my shares before the special
meeting?
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A:
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The record date of the special meeting is earlier than the
special meeting and the date that the merger is expected to be
completed. If you sell or otherwise transfer your shares of
Common Stock after the record date but before the special
meeting, you will retain your right to vote at the special
meeting, but will have transferred the right to receive $33.75
per share in cash, without interest and less any applicable
withholding taxes, to be received by our stockholders in the
merger. In order to receive the $33.75 per share, you must hold
your shares through completion of the merger.
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Q:
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Am I entitled to exercise appraisal rights instead of
receiving the merger consideration for my shares?
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A:
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Yes. As a holder of Common Stock, you are entitled to appraisal
rights under Delaware law in connection with the merger if you
meet certain conditions. See Appraisal Rights
beginning on page 60.
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Q:
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Will the merger be taxable to me?
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A:
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If you are a U.S. Holder (as defined below), the merger will be
a taxable transaction to you for U.S. federal income tax
purposes. In general, a U.S. Holder who receives cash in
exchange for shares of Common Stock in the merger will recognize
capital gain or loss for U.S. federal income tax purposes with
respect to each such share equal to the difference, if any,
between the amount of cash per share received for such share
(determined before the deduction of any applicable withholding
taxes) and the holders adjusted tax basis in such share.
If you are a
Non-U.S.
Holder (as defined below), any gain received on your receipt of
cash in the merger generally will not subject to U.S. federal
income tax unless you have certain connections to the United
States. For a more detailed explanation of the tax consequences
of the merger see Material U.S. Federal Income Tax
Consequences of the Merger to Our
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9
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Stockholders beginning on page 43 of this proxy
statement. You should consult your tax advisor on how specific
tax consequences of the merger apply to you.
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Q:
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When is the merger expected to be completed?
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A:
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We are working toward completing the merger as quickly as
possible, and we anticipate that it will be completed in the
fourth quarter of 2010. In order to complete the merger, we must
obtain stockholder approval and the other closing conditions
under the merger agreement must be satisfied or waived (as
permitted by law). See The Merger Agreement
Conditions to the Merger beginning on page 54.
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Q:
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Should I send in my stock certificates now?
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A:
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No, please do not submit your stock certificates at this time.
After the merger is completed, you will be sent a letter of
transmittal with detailed written instructions for exchanging
your stock certificates for the merger consideration. If your
shares are held in street name by your broker, bank
or other nominee, you will receive instructions from your
broker, bank or other nominee as to how to effect the surrender
of your shares in exchange for the merger consideration. Please
do not send your certificates in now.
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Q:
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How can I obtain additional information about the Company?
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A:
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We will provide a copy of our Annual Report to Stockholders
and/or our Annual Report on
Form 10-K
for the year ended December 31, 2009, excluding certain of
its exhibits, and other filings with the SEC without charge to
any stockholder who makes a written or oral request to Brent
Turner, our Executive Vice President, Finance and
Administration, at 6640 Carothers Parkway, Suite 500,
Franklin, Tennessee 37067, or at
(615) 312-5700.
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Our SEC filings also may be accessed on the internet at
http://www.sec.gov
or on the Investor Relations page of the Companys website
at
http://www.psysolutions.com.
Our website address is provided as an inactive textual reference
only. The information provided on our website is not part of
this proxy statement, and therefore is not incorporated by
reference. For a more detailed description of the information
available, please refer to Where You Can Find More
Information beginning on page 68.
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Q:
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Whom should I contact if I have questions?
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A:
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If you would like additional copies, without charge, of this
proxy statement or if you have questions about the merger,
including the procedures for voting your shares, you should
contact our proxy solicitor, Innisfree, toll-free at
(877) 456-3510
(banks and brokers call collect at
(212) 750-5833),
or contact us in writing at our principal executive offices at
6640 Carothers Parkway, Suite 500, Franklin, Tennessee
37067, Attention: Brent Turner, Executive Vice President,
Finance and Administration, or by telephone at
(615) 312-5700.
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10
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement, and the documents to which we refer you in
this proxy statement, contain forward-looking statements based
on estimates and assumptions. Forward-looking statements include
information concerning possible or assumed future results of
operations of the Company, the expected completion and timing of
the merger and other information relating to the merger. There
are forward-looking statements throughout this proxy statement,
including, without limitation, under the headings
Summary and The Merger and in statements
containing the words believes, plans,
expects, anticipates,
intends, estimates or other similar
expressions. You should be aware that forward-looking statements
involve known and unknown risks and uncertainties. Although we
believe that the expectations reflected in these forward-looking
statements are reasonable, we cannot assure you that the actual
results or developments we anticipate will be realized, or even
if realized, that they will have the expected effects on the
business or operations of the Company. These forward-looking
statements speak only as of the date on which the statements
were made and we undertake no obligation to publicly update or
revise any forward-looking statements made in this proxy
statement or elsewhere as a result of new information, future
events or otherwise. In addition to other factors and matters
contained in this proxy statement, we believe the following
factors could cause actual results to differ materially from
those discussed in the forward-looking statements:
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the occurrence of any event, change or other circumstances that
could give rise to the termination of the merger agreement;
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the outcome of any legal proceedings that have been or may be
instituted against us and others relating to the merger
agreement or other matters;
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the inability to complete the merger due to the failure to
obtain stockholder approval or the failure to satisfy other
conditions to consummation of the merger, including the
expiration or termination of any waiting period applicable to
the consummation of the merger under the HSR Act;
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the failure to obtain the necessary debt financing arrangements
set forth in the commitment letter received in connection with
the merger;
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the failure of the merger to close for any other reason;
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risks that the proposed transaction disrupts current plans and
operations and the potential difficulties in employee retention
as a result of the merger;
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the effect of the announcement of the merger on our customer
relationships, operating results and business generally;
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the amount of the costs, fees, expenses and charges related to
the merger and the actual terms of the debt financing that will
be obtained for the merger;
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and other risks detailed in our current filings with the SEC,
including our most recent filings on
Form 10-Q
and
Form 10-K.
See Where You Can Find More Information beginning on
page 68. Many of the factors that will determine our future
results are beyond our ability to control or predict. In light
of the significant uncertainties inherent in the forward-looking
statements contained herein, readers should not place undue
reliance on forward-looking statements, which reflect
managements views only as of the date hereof. We cannot
guarantee any future results, levels of activity, performance or
achievements. The statements made in this proxy statement
represent our views as of the date of this proxy statement, and
it should not be assumed that the statements made herein remain
accurate as of any future date. Moreover, we assume no
obligation to update forward-looking statements or update the
reasons that actual results could differ materially from those
anticipated in forward-looking statements, except as required by
law.
11
THE
PARTIES TO THE MERGER
The
Company
Psychiatric Solutions, Inc. is a Delaware corporation with its
headquarters in Franklin, Tennessee. We are a leading provider
of inpatient behavioral health care services in the United
States, and offer an extensive continuum of behavioral health
programs to critically ill children, adolescents and adults. We
operate 94 inpatient behavioral health care facilities with
approximately 11,000 beds in 32 states, Puerto Rico, and
the U.S. Virgin Islands. The Company offers these services
through a combination of acute inpatient behavioral facilities
and residential treatment centers. We also manage freestanding
psychiatric inpatient facilities for government agencies and
psychiatric inpatient units within medical/surgical hospitals
owned by others.
Our principal executive offices are located at 6640 Carothers
Parkway, Suite 500, Franklin, Tennessee 37067, and our
telephone number is
(615) 312-5700.
For more information about us, please visit our website at
www.psysolutions.com. Our website address is provided as an
inactive textual reference only. The information provided on our
website is not part of this proxy statement, and therefore is
not incorporated by reference. We are publicly traded on the
NASDAQ under the symbol PSYS.
UHS
Universal Health Services, Inc. is a Delaware corporation with
its headquarters in King of Prussia, Pennsylvania. UHS is one of
the nations largest hospital companies operating, through
its subsidiaries, acute care hospitals, behavioral health care
facilities and ambulatory centers located throughout the United
States and Puerto Rico. UHS also acts as the advisor to
Universal Health Realty Income Trust, a real estate investment
trust whose stock is publicly traded on the New York Stock
Exchange.
UHS principal executive offices are located at Universal
Corporate Center, 367 South Gulph Road, King of Prussia,
Pennsylvania 19406, and its telephone number is
(610) 768-3300.
For more information about UHS, please visit its website at
www.uhsinc.com. UHS website address is provided as an
inactive textual reference only. The information provided on
UHS website is not part of this proxy statement, and
therefore is not incorporated by reference. UHS common
stock is publicly traded on the NYSE under the symbol
UHS.
Merger
Sub
Olympus Acquisition Corp. is a Delaware corporation that was
formed solely for the purpose of completing the proposed merger.
Upon the consummation of the proposed merger, Olympus
Acquisition Corp. will cease to exist and the Company will
continue as the surviving corporation and wholly-owned
subsidiary of UHS. Merger Sub is wholly-owned by UHS and has not
engaged in any business except as contemplated by the merger
agreement.
Merger Subs principal executive offices are located at
Universal Corporate Center, 367 South Gulph Road, King of
Prussia, Pennsylvania 19406, and its telephone number is
(610) 768-3300.
12
THE
SPECIAL MEETING
This proxy statement is furnished in connection with the
solicitation of proxies by our board of directors in connection
with the special meeting of our stockholders relating to the
merger.
Date,
Time and Place of the Special Meeting
The special meeting is scheduled to be held as follows:
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Date:
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[ ], 2010
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Time:
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[ ] [ ].m. (Central Time)
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Place:
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6640 Carothers Parkway, Suite 500
Franklin, Tennessee 37067
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Proposals
to be Considered at the Special Meeting
At the special meeting, you will be asked to vote on a proposal
to adopt the merger agreement, and to approve the adjournment of
the special meeting, if necessary or appropriate, to solicit
additional proxies if there are insufficient votes at the time
of the meeting to adopt the merger agreement. A copy of the
merger agreement is attached as Annex A to this proxy
statement.
Record
Date
We have fixed the close of business on [ ],
2010 as the record date for the special meeting, and only
holders of record of Common Stock on the record date are
entitled to vote at the special meeting. On the record date,
there were [ ] shares of Common Stock
outstanding and entitled to vote.
Voting
Rights; Quorum; Vote Required for Approval
Each share of Common Stock entitles its holder to one vote on
all matters properly coming before the special meeting. The
presence in person or represented by proxy of stockholders
entitled to cast a majority of the votes of all issued and
outstanding shares entitled to vote will constitute a quorum for
the purpose of considering the proposals. Shares of Common Stock
represented at the special meeting, but not voted, including
shares of Common Stock for which proxies have been received but
for which stockholders have abstained, will be treated as
present at the special meeting for purposes of determining the
presence or absence of a quorum for the transaction of all
business. In the event that a quorum is not present at the
special meeting, it is expected that the meeting will be
adjourned or postponed to solicit additional proxies. Any
adjournment may be made without notice (if the adjournment is
not more than 30 days) by an announcement at the special
meeting of the time, date and place of the adjourned meeting.
Adoption of the merger agreement requires the affirmative vote
of the holders of a majority of the outstanding shares of Common
Stock entitled to vote on the matter. For the proposal to adopt
the merger agreement, you may vote FOR, AGAINST or ABSTAIN.
Abstentions will not be counted as votes cast or shares voting
on the proposal to adopt the merger agreement, but will count
for the purpose of determining whether a quorum is present.
If you abstain, it will have the same effect as if you vote
AGAINST the adoption of the merger agreement
. In addition,
if your shares are held in the name of a broker, bank or other
nominee, your broker, bank or other nominee will not be entitled
to vote your shares in the absence of specific instructions.
These non-voted shares, or broker non-votes, will
be counted for purposes of determining a quorum, but will have
the same effect as a vote AGAINST the adoption of the merger
agreement
. Your broker, bank or nominee will vote your
shares only if you provide instructions on how to vote by
following the instructions provided to you by your broker, bank
or nominee.
The proposal to adjourn the special meeting, if necessary or
appropriate, to solicit additional proxies requires the
affirmative vote of the holders of a majority of the outstanding
shares of Common Stock present or represented by proxy at the
special meeting and entitled to vote on the matter. For the
proposal to adjourn the special meeting, if necessary or
appropriate, to solicit additional proxies, you may vote FOR,
AGAINST or ABSTAIN. Abstentions and broker non-votes will count
for the purpose of determining whether a quorum is
13
present, but abstentions and broker non-votes will not count as
shares present and entitled to vote on the proposal to adjourn
the meeting.
As a result, abstentions and broker non-votes
will have no effect on the vote to adjourn the special meeting,
which requires the vote of the holders of a majority of the
shares of Common Stock present or represented by proxy at the
meeting and entitled to vote on the matter.
Shares Owned
by Our Directors and Executive Officers
As of [ ], 2010, the record date, our directors
and executive officers held and were entitled to vote, in the
aggregate, [ ] shares of Common Stock,
representing approximately [ ]% of the
outstanding Common Stock. If our directors and executive
officers vote their shares in favor of adopting the merger
agreement, [ ]% of the outstanding shares of
Common Stock will have voted for the proposal to adopt the
merger agreement. This means that additional holders of
approximately [ ]% of all shares entitled to
vote at the special meeting would need to vote for the proposal
to adopt the merger agreement in order for it to be adopted.
Voting
and Revocation of Proxies
Stockholders of record may submit proxies by mail, by telephone
or over the Internet. Stockholders who wish to submit a proxy by
mail should mark, date, sign and return the proxy card in the
envelope furnished. If you hold your shares in your name as a
stockholder of record, you may vote by telephone or
electronically through the Internet by following the
instructions included with your proxy card. Stockholders who
hold shares beneficially through a nominee (such as a bank or
broker) may be able to submit a proxy by mail, or by telephone
or over the Internet if those services are offered by the
nominee.
Proxies received at any time before the special meeting, and not
revoked or superseded before being voted, will be voted at the
special meeting. Where a specification is indicated by the
proxy, it will be voted in accordance with the specification. If
you sign your proxy card without indicating your vote, your
shares will be voted FOR the adoption of the merger
agreement and FOR the adjournment of the special
meeting, if necessary, to solicit additional proxies, and in
accordance with the recommendations of our board of directors on
any other matters properly brought before the special meeting
for a vote.
You have the right to revoke your proxy at any time before the
vote taken at the special meeting:
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if you hold your shares in your name as a stockholder of record,
by notifying our Executive Vice President, General Counsel and
Secretary, Christopher L. Howard, at 6640 Carothers Parkway,
Suite 500, Franklin, Tennessee 37067;
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by attending the special meeting and voting in person (your
attendance at the meeting will not, by itself, revoke your
proxy; you must vote in person at the meeting);
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by submitting a later-dated proxy card; or
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if you have instructed a broker, bank or other nominee to vote
your shares, by following the directions received from your
broker, bank or other nominee to change those instructions.
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Please do not send in your stock certificates with your proxy
card.
When the merger is completed, a separate
letter of transmittal will be mailed to you that will enable you
to tender your stock certificates and receive the merger
consideration.
Rights of
Stockholders Who Object to the Merger
Our stockholders are entitled to appraisal rights under Delaware
law in connection with the merger. This means that you are
entitled to have the value of your shares determined by the
Delaware Court of Chancery and to receive payment based on that
valuation. The ultimate amount you receive as a dissenting
stockholder in an appraisal proceeding may be more than, the
same as or less than the amount you would have received under
the merger agreement.
14
To exercise your appraisal rights, you must submit a written
demand for appraisal to the Company before the vote is taken on
the merger agreement and you must not vote in favor of the
adoption of the merger agreement. Your failure to follow exactly
the procedures specified under Delaware law will result in the
loss of your appraisal rights. See Appraisal Rights
beginning on page 60 and the text of the Delaware appraisal
rights statute reproduced in its entirety as Annex C to
this proxy statement.
Solicitation
of Proxies
This proxy solicitation is being made and paid for by us on
behalf of our board of directors. In addition, we have retained
Innisfree to assist in the solicitation. We will pay Innisfree
approximately $50,000, plus
out-of-pocket
expenses, for its assistance. Our directors, executive officers
and employees also may solicit proxies by personal interview,
mail,
e-mail,
telephone, facsimile or other means of communication. These
persons will not be paid additional remuneration for their
efforts. We also will request brokers and other fiduciaries to
forward proxy solicitation materials to the beneficial owners of
shares of Common Stock that the brokers and fiduciaries hold of
record. We will reimburse them for their reasonable
out-of-pocket
expenses. In addition, we will indemnify Innisfree against any
losses arising out of that firms proxy soliciting services
on our behalf.
Other
Business
We currently are not aware of any business to be acted upon at
the special meeting other than the matters discussed in this
proxy statement. Under our bylaws, business transacted at the
special meeting is limited to the purposes stated in the notice
of the special meeting, which is provided at the beginning of
this proxy statement. If other matters do properly come before
the special meeting, or at any adjournment or postponement of
the special meeting, we intend that shares of Common Stock
represented by properly submitted proxies will be voted in
accordance with the recommendations of our board of directors.
Questions
and Additional Information
If you have questions about the merger or how to submit your
proxy, or if you need additional copies of this proxy statement
or the enclosed proxy card or voting instructions, please call
our proxy solicitor, Innisfree, toll-free at
(877) 456-3510
(banks and brokers call collect at
(212) 750-5833),
or contact us in writing at our principal executive offices at
6640 Carothers Parkway, Suite 500, Franklin, Tennessee
37067, Attention: Brent Turner, Executive Vice President,
Finance and Administration, or by telephone at
(615) 312-5700.
Availability
of Documents
The reports, opinions or appraisals referenced in this proxy
statement will be made available for inspection and copying at
the principal executive offices of the Company during our
regular business hours by any interested holder of Common Stock.
15
THE
MERGER
This discussion of the merger is qualified by reference to
the merger agreement, which is attached to this proxy statement
as Annex A. You should read the entire merger agreement
carefully as it is the legal document that governs the
merger.
Background
of the Merger
In 2007 and early 2008, in the context of exploring a potential
acquisition by the Company, the Company held discussions with
four private equity firms regarding a possible equity investment
in the Company. In November and December 2009, three of these
private equity firms contacted the Company and requested an
opportunity to update their due diligence review of the Company
for the purpose of determining whether they would be interested
in a possible equity investment in the Company or potentially
acquiring the entire Company. The Company entered into
confidentiality agreements with these three private equity firms
and provided them confidential information concerning the
Company. After meeting with senior management and conducting due
diligence reviews during November and December 2009 and January
and February 2010, each of the three private equity firms
determined not to pursue an investment in or acquisition of the
Company at that time.
In September 2009, the Company explored the possible acquisition
of a company owned by another private equity firm, which private
equity firm is referred to in this proxy statement as Potential
Purchaser One. The Company elected not to pursue the acquisition.
In December 2009, Potential Purchaser One contacted the Company
to discuss the possibility of an equity investment in or an
acquisition of the entire Company and entered into a
confidentiality agreement with the Company. The Company provided
confidential information concerning the Company to Potential
Purchaser One in December 2009 and January and February 2010. In
January and February 2010, senior management met with Potential
Purchaser One and its representatives to discuss Potential
Purchaser Ones evaluation of the Company and the
possibility of Potential Purchaser One acquiring the entire
Company.
On March 2, 2010, at a telephonic meeting of the board of
directors, management advised the board of directors of its
discussions with Potential Purchaser One regarding a possible
acquisition of the Company. The board of directors determined
that it should consider establishing a special committee
comprised of independent, disinterested directors to review,
evaluate and consider such a transaction, as well as potential
strategic alternatives available to the Company. At the meeting,
representatives of Waller Lansden Dortch & Davis, LLP
(Waller Lansden), counsel for the Company, advised
the board of directors regarding its fiduciary duties in
engaging in a possible strategic review process. On
March 4, 2010, acting by unanimous written consent, the
board of directors established a special committee, comprised of
Messrs. Grant, Dill, Gore and Wissing. The board of
directors granted the special committee the exclusive power and
authority to, among other things, review, evaluate and consider
all strategic alternatives available to the Company, including
determining whether pursuing a possible sale of the Company
would be in the best interests of the Company and its
stockholders, and, as appropriate, to reject or to recommend to
the board of directors any strategic alternatives it considered.
Mr. Grant interviewed representatives of
Shearman & Sterling LLP (Shearman &
Sterling) as potential legal counsel for the special
committee and discussed with the special committee the results
of his interview. The special committee determined to engage
Shearman & Sterling as its legal advisor, based upon
Shearman & Sterlings reputation and experience.
A meeting of the special committee was held by telephone on
March 4, 2010. At the meeting, representatives of
Shearman & Sterling reviewed with the special
committee its fiduciary duties in connection with its
consideration of strategic alternatives available to the
Company. The special committee selected Mr. Grant as its
chairman and discussed the engagement of an independent
financial advisor. The special committee arranged interviews
with four candidates, including representatives of Goldman Sachs.
16
On March 5, 2010, the board of directors received a written
proposal from Potential Purchaser One regarding an acquisition
of the Company at a price of $27.75 per share. The proposal
indicated that Potential Purchaser One had secured fully
committed financing in connection with its proposal.
On March 8, 2010, the independent members of the
Companys board of directors met at the offices of
Shearman & Sterling in New York to interview
candidates to serve as the special committees financial
advisor. After these interviews, the special committee
determined to engage Goldman Sachs as its financial advisor,
based upon Goldman Sachs qualifications, expertise and
reputation. Also on March 8, 2010, at the request of
Potential Purchaser One, representatives of Potential Purchaser
One met with the independent directors to review the proposal
submitted by Potential Purchaser One on March 5, 2010.
On March 10, 2010, the online edition of
The Wall Street
Journal
reported that the Company was in talks with Bain
Capital regarding an acquisition of the Company. The Company
issued a press release later the same day confirming that it had
been approached by third parties in connection with a potential
acquisition of the Company and that it had established a special
committee, which had retained Goldman Sachs and
Shearman & Sterling as its financial and legal
advisors, respectively. The Companys common stock, which
closed at $23.91 on the day prior to
The Wall Street Journal
report, closed at $29.00 on March 10, 2010.
At a telephonic meeting of the special committee on
March 11, 2010, representatives of Goldman Sachs informed
the special committee that, following
The Wall Street Journal
article, they had received calls from parties expressing
interest in pursuing a potential transaction with the Company,
including UHS and other private equity and strategic buyers.
Additionally, Potential Purchaser One contacted representatives
of Goldman Sachs to express its continued interest in pursuing a
potential transaction with the Company.
Also on March 11, 2010, representatives of Goldman Sachs
and Shearman & Sterling met with members of management
at the Companys offices in Franklin, Tennessee and
received a presentation regarding the Companys business
and financial results. During a telephonic meeting of the
special committee on March 12, 2010, representatives of
Goldman Sachs updated the special committee regarding those
presentations and advised the special committee that they
continued to receive calls from parties expressing interest in
pursuing a potential transaction with the Company.
To assist the special committee with its evaluation of strategic
alternatives available to the Company, the special committee
requested the Companys management to prepare a five-year
business plan for the Company. At a telephonic meeting of the
special committee on March 17, 2010, the special committee
determined to schedule a meeting with management for the
following week so that members of management could present
additional financial and other information regarding the Company
to the special committee and representatives of Goldman Sachs.
On March 24, 2010, the special committee and its legal and
financial advisors met with members of management at the offices
of Shearman & Sterling in New York to discuss
managements preliminary views with respect to a five-year
business plan.
The special committee directed representatives of Goldman Sachs
to apply certain sensitivity adjustments to managements
preliminary five-year plan following the meeting on
March 24, 2010, and to consult with management as
management continued to modify and refine its five-year business
plan. At a telephonic meeting of the special committee on
March 31, 2010, representatives of Goldman Sachs discussed
with the special committee modifications that management had
made to its preliminary five-year plan, as well as sensitivity
adjustments representatives of Goldman Sachs had applied to
managements five-year plan at the direction of the special
committee. The special committee discussed the modifications and
sensitivities and directed representatives of Goldman Sachs to
discuss with management further refinements to managements
five-year plan. The special committee further directed
representatives of Goldman Sachs to prepare financial analyses
for various strategic alternatives available to the Company.
On April 5, 2010, the special committee held a meeting at
the offices of Shearman & Sterling in New York,
during which representatives of Goldman Sachs discussed with the
special committee its preliminary financial analyses of various
strategic alternatives available to the Company, including
remaining an independent company, pursuing a sale or merger with
a company within the health care industry, pursuing a leveraged
buyout transaction with a private equity firm, conducting a
share repurchase program, issuing a
17
special dividend payment, pursuing acquisitions of additional
facilities, divesting selected facilities and converting the
Company into a real estate investment trust. Following
discussions, the special committee directed representatives of
Goldman Sachs to explore on behalf of the special committee both
a possible sale of the Company as well as other alternatives
available to the Company if the Company remained independent,
including a leveraged recapitalization or an extraordinary
dividend.
At a telephonic meeting of the special committee on
April 7, 2010, representatives of Goldman Sachs discussed
with the special committee further modifications that management
had made to its five-year plan. The special committee discussed
the modifications and directed representatives of Goldman Sachs
to discuss with management further refinements to
managements five-year plan. At a telephonic meeting of the
special committee on April 9, 2010, representatives of
Goldman Sachs reviewed with the special committee
managements further revised five-year plan and discussed
with the special committee its preliminary financial analyses of
strategic alternatives available to the Company that they had
updated since the special committees April 5 meeting
based on the further revised five-year plan. After discussion,
the special committee directed representatives of Goldman Sachs
to use the operating forecasts reflected in managements
revised five-year plan for purposes of any further financial
analyses. Managements revised five-year business plan is
described under Certain Financial Projections
beginning on page 33. The special committee also directed
representatives of Goldman Sachs to use, for purposes of any
further financial analyses, capital structure assumptions
provided by the special committee, which reflected an increase
to the Companys total indebtedness and the repurchase by
the Company of a portion of its outstanding shares.
Also at the April 9 meeting, the special committee discussed the
initial proposal from Potential Purchaser One to acquire the
Company for $27.75 per share. After considering various factors,
including Goldman Sachs preliminary financial analyses,
the special committee directed representatives of Goldman Sachs
to inform Potential Purchaser One that the special committee was
not prepared to explore a possible sale of the company at a
price of $27.75 per share. The special committee also instructed
representatives of Goldman Sachs to inform Potential Purchaser
One that it was welcome to continue its due diligence on the
Company if it agreed to certain amendments to the
confidentiality agreement it had entered into with the Company,
including the addition of a customary standstill provision
prohibiting it from, among other things, acquiring the stock or
assets of the Company without the special committees
consent. Representatives of Goldman Sachs then reviewed with the
special committee a list of 19 potential strategic, private
equity and real estate investment trust parties that
representatives of Goldman Sachs could contact to gauge their
interest in pursuing a possible transaction with the Company.
After discussion, the special committee authorized
representatives of Goldman Sachs to contact each of the 19
parties identified by representatives of Goldman Sachs, as well
as three other strategic parties identified by the special
committee. The special committee also instructed representatives
of Goldman Sachs to discuss with management other possible
strategic alternatives, including a share repurchase program and
the payment of an extraordinary dividend.
As directed by the special committee, in the days following the
April 9 meeting, representatives of Goldman Sachs contacted the
22 parties previously identified with the special committee, and
the Company entered into confidentiality agreements with five of
those parties, including UHS, two private equity firms jointly
exploring a possible transaction with the Company (with the
consent of the special committee), a third private equity firm
and one real estate investment trust. Additionally, a private
equity firm that had executed a confidentiality agreement and
conducted a due diligence review of the Company in December 2009
and January 2010 indicated to representatives of Goldman Sachs
that it was only interested in evaluating a possible transaction
with the Company jointly with Potential Purchaser One. The
special committee consented to such a joint evaluation, but
stated that both parties (which are collectively referred to in
this proxy statement as the co-bidders) would need
to enter into amendments to their confidentiality agreements
before they would be allowed to proceed further. At the
direction of the special committee, representatives of Goldman
Sachs advised each of the interested parties that preliminary
indications of interest with respect to a possible acquisition
of the Company would be due by April 30, 2010.
At a telephonic meeting of the special committee held on
April 26, 2010, representatives of Goldman Sachs informed
the special committee that the co-bidders had advised
representatives of Goldman Sachs that
18
they would not improve upon Potential Purchaser Ones
initial proposal to acquire the Company for $27.75 per share
until all interested parties were required to submit their final
proposals.
On April 27, 2010, the real estate investment trust that
had entered into a confidentiality agreement with the Company
informed representatives of Goldman Sachs that it was no longer
interested in pursuing an acquisition of the Company.
Between the time each of the parties entered into
confidentiality agreements with the Company and April 30,
2010, the parties conducted due diligence reviews of the
Company, and members of management conducted separate due
diligence sessions for each requesting party.
On April 30, 2010, UHS submitted a non-binding preliminary
indication of interest to acquire the Company for a price in the
range of $32.00 to $34.00 per share in cash and stated that its
offer was not subject to a financing condition. The co-bidders
advised representatives of Goldman Sachs that, while they would
be willing to meaningfully improve upon the $27.75
per share price that Potential Purchaser One had initially
indicated in its preliminary proposal submitted on March 5,
2010, they would not propose an increased price until all
parties were required to submit their final proposals. Also on
April 30, 2010, three other private equity firms (two of
which were acting jointly) submitted preliminary proposals to
acquire the Company for a price in the range of $27.00 to $28.00
per share in cash.
On the morning of May 3, 2010, at a telephonic meeting of
the special committee, representatives of Goldman Sachs
described for the special committee the terms of the preliminary
indications of interest, including the price ranges that the
parties had submitted. After discussion, the special committee
directed representatives of Goldman Sachs to advise the private
equity parties proposing $27.00 to $28.00 per share that the
special committee was not prepared to pursue a transaction in
that price range. The special committee also concluded that it
would be advisable to focus on securing improved and definitive
proposals from UHS and the co-bidders. The special committee
determined that it was in the best interests of the Company and
its stockholders to continue to explore the possibility of a
transaction with both UHS and the co-bidders and directed
representatives of Goldman Sachs to inform UHS and the
co-bidders that the special committee required final proposals
by May 14, 2010. At a telephonic meeting of the special
committee in the afternoon of May 3, 2010, representatives
of Shearman & Sterling reviewed with the special
committee the provisions commonly found in merger agreements for
transactions such as those proposed by UHS and the co-bidders,
including provisions relating to antitrust and other regulatory
matters, and discussed with the special committee the draft
agreements they would send to each of UHS and the co-bidders.
Between May 3, 2010 and May 14, 2010, UHS and the
co-bidders continued their due diligence reviews of the Company,
and the Company entered into amended confidentiality agreements
with the co-bidders. At the direction of the special committee,
representatives of Shearman & Sterling sent initial
drafts of the merger agreements to each of UHS and the
co-bidders on May 4, 2010. Also at the direction of the
special committee, between May 4, 2010 and May 14,
2010, representatives of Shearman & Sterling had
multiple meetings with members of the Companys management
and with counsel for each of UHS and the co-bidders regarding
antitrust and other regulatory matters, and negotiated the terms
of the draft merger agreements with counsel for each of UHS and
the co-bidders.
On May 14, 2010, representatives of Shearman &
Sterling and Goldman Sachs had multiple discussions with UHS and
the co-bidders regarding the proposals they were expected to
submit later that day, including, in the case of
Shearman & Sterling, the terms of the draft merger
agreements each of the parties indicated it would be willing to
accept. Later that day, UHS submitted a proposal to acquire the
Company at a price of $32.50 per share, and the co-bidders
submitted a proposal to acquire the Company at a price of $30.50
per share.
A meeting of the special committee was held at the offices of
Shearman & Sterling in New York on May 14, 2010.
At the meeting, representatives of Shearman & Sterling
reviewed with the special committee its fiduciary duties in
connection with the evaluation of a proposal to acquire the
Company. Representatives of Shearman & Sterling also
discussed with the special committee the status of negotiations
regarding the draft merger agreements with each of UHS and the
co-bidders, and the principal provisions and other terms of the
draft merger agreements submitted by the two parties, including
provisions relating to certainty of closing and
19
remedies with respect to breaches of the agreements.
Additionally, representatives of Shearman & Sterling
reviewed with the special committee the antitrust and other
regulatory matters with respect to a potential transaction with
each party. Representatives of Goldman Sachs discussed with the
special committee its updated financial analyses regarding
strategic alternatives available to the Company and the proposed
purchase prices offered by UHS and the co-bidders.
Mr. Jacobs met separately with the special committee and
encouraged the special committee not to end the auction process
prematurely and to proceed in the manner the special committee
concluded was in the best interests of the Company and all of
its stockholders.
The special committee discussed the viability and potential
benefits to the Companys stockholders of various strategic
alternatives available to the Company, including remaining
independent and pursuing a leveraged stock repurchase. In
addition, the special committee evaluated the relative benefits
expected to be realized by the Companys stockholders from
the available strategic alternatives and from a sale of the
Company to UHS or the co-bidders, and ultimately determined that
a sale would be in the best interests of the Companys
stockholders.
In considering the competing proposals from UHS and the
co-bidders, the special committee considered the strategic
alternatives available to the Company, the purchase prices
submitted by the parties, as well as the terms of the draft
merger agreements each of the parties indicated it would be
willing to accept. In assessing certainty of closing, the
special committee considered the potential adverse impact on the
Company and its business if an announced sale failed to close.
On the basis of the foregoing, the special committee determined
that it would be in the best interests of the Companys
stockholders to continue discussions with the co-bidders and
authorized its advisors to communicate to the co-bidders its
request that they improve their price and the terms of their
draft merger agreement with respect to certainty of closing, and
to provide the special committee with its best, final proposal
by mid-afternoon on the following day. The special committee
also directed representatives of Shearman & Sterling
to inform counsel to UHS that the special committee would be
proceeding with another party over the weekend regarding a
transaction involving the Company and that Goldman Sachs was
instructed not to engage with UHS financial advisors. Upon
receipt of this information, counsel to UHS expressed its
objection to such an approach.
Following the meeting on May 14, 2010 and throughout the
day on May 15, 2010, at the direction of the special
committee, representatives of Shearman & Sterling
continued to negotiate the terms of the draft merger agreement
with the co-bidders and representatives of Goldman Sachs
continued to have discussions with the co-bidders regarding the
co-bidders ability to improve their proposed purchase
price. On May 15, 2010, the special committee received a
revised proposal from the co-bidders, which increased the price
they would be willing to pay to acquire the Company to $31.25
per share and included improved terms relating to certainty of
closing.
At a telephonic meeting of the special committee in the
afternoon of May 15, 2010, the special committee discussed
the revised proposal that the co-bidders had submitted. The
special committee reviewed and considered the relative value and
certainty of closing provided by the proposals submitted by the
co-bidders and by UHS and determined that the proposal from the
co-bidders was more favorable to the Company and its
stockholders. Nevertheless, the special committee also
determined to provide UHS with an opportunity to improve its
proposal. The special committee authorized its advisors to
communicate to UHS that the special committee was prepared to
recommend to the Companys board of directors a transaction
with a third party, unless UHS was able to meaningfully improve
its offer to acquire the Company. The special committee also
directed representatives of Goldman Sachs to inform the
co-bidders that the special committee had determined to approach
a third party and offer it an opportunity to improve its
proposal.
At the special committees direction, immediately following
the meeting on May 15, 2010, representatives of
Shearman & Sterling telephoned counsel to UHS and
advised it that the special committee had a proposal from
another party that it considered more attractive than the
proposal from UHS, and that the special committee was prepared
to execute a merger agreement with that other party unless UHS
improved both its price and the terms of its draft merger
agreement with respect to certainty of closing. UHS legal
and financial advisors subsequently informed representatives of
Shearman & Sterling and Goldman Sachs, respectively,
that UHS would submit a revised and improved proposal the
following morning.
20
At a telephonic meeting of the special committee on the morning
of May 16, 2010, representatives of Goldman Sachs and
Shearman & Sterling discussed with the special
committee a revised proposal received earlier that morning from
UHS pursuant to which UHS increased its proposed purchase price
by $1.00 to $33.50 per share and agreed to revisions to the
draft merger agreement that improved terms relating to the
timing and certainty of closing. Representatives of Goldman
Sachs also discussed with the special committee the fact that
UHS financial advisor had indicated that the revised
proposal reflected UHS best offer and that they had
offered their highest price. After discussion of this revised
proposal and the improved terms offered by UHS (including with
respect to UHS commitment to obtain antitrust approval),
the special committee determined that UHS proposal was
more favorable to the Company and its stockholders than the
proposal from the co-bidders and directed representatives of
Shearman & Sterling and Goldman Sachs to finish
negotiations with UHS prior to the meetings of the special
committee and board of directors scheduled for that evening. The
special committee also requested that representatives of Goldman
Sachs inform the co-bidders that the special committee expected
to recommend to the Companys board of directors by the end
of the day that the Company enter into a transaction with
another party.
The special committee held a telephonic meeting in the late
afternoon of May 16, 2010, during which representatives of
Goldman Sachs discussed with the special committee the
conversation they had with the co-bidders earlier that day at
the direction of the special committee. Representatives of
Goldman Sachs informed the special committee that the co-bidders
had advised representatives of Goldman Sachs that they may be
able to increase their $31.25 price proposal, but not by a
material amount. The special committee then discussed a revised
proposal submitted by the co-bidders after the co-bidders
conversation with representatives of Goldman Sachs, which
increased their offer by $0.75 to $32.00 per share, with an
indication that, if the incremental move would be of interest to
the special committee, the co-bidders may be able to offer up to
$33.00 per share subject to receiving agreement from their
financing sources. Representatives of Shearman &
Sterling informed the special committee that the merger
agreement with UHS had been finalized and reviewed with the
special committee the resolution of the issues that had remained
open as of that morning, and the special committee discussed the
financial and other terms of the revised proposal submitted by
UHS. After considering the relative value and certainty of
closing provided by the revised proposals submitted by the
co-bidders and by UHS, the special committee concluded that even
if the co-bidders could submit a proposal at $33.00 per share,
the UHS offer was more favorable to the Company and its
stockholders, in light of, among other things, the fact that UHS
was offering a higher purchase price and greater closing
certainty, including because the Companys sole remedy if
the co-bidders failed to consummate the transaction would be to
seek payment of a specified reverse termination fee (as opposed
to requiring them to consummate the transaction). The special
committee determined that, if the co-bidders submitted a
proposal at $33.00 per share, the special committee would seek
an increase from UHS to the per share purchase price proposed by
UHS. Representatives of Goldman Sachs reviewed with the special
committee its financial analyses and rendered to the special
committee Goldman Sachs oral opinion to the effect that,
as of the date of the merger agreement and subject to the
factors and assumptions described in the opinion, the per share
merger consideration to be paid to the holders of shares of
Common Stock (other than UHS and its affiliates) pursuant to the
merger agreement was fair from a financial point of view to such
holders. The special committee unanimously agreed to recommend
to the entire board of directors that it approve and declare
advisable the merger and the merger agreement with UHS, and that
the board of directors submit the merger agreement to the
Companys stockholders and resolve to recommend that the
Companys stockholders adopt the merger agreement.
Immediately following the special committee meeting, a
telephonic meeting of the entire board of directors was convened
at which members of senior management of the Company and
representatives of Waller Lansden, Shearman & Sterling
and Goldman Sachs were in attendance. At the meeting, the
special committee recommended to the board of directors that it
approve and declare advisable the merger and the merger
agreement with UHS at $33.50 per share, and that the board of
directors submit the merger agreement to the Companys
stockholders and resolve to recommend that the Companys
stockholders adopt the merger agreement. Representatives of
Goldman Sachs confirmed to the board of directors that they had
rendered to the special committee Goldman Sachs oral
opinion to the effect that, as of the date of the merger
agreement and subject to the factors and assumptions described
in the Goldman Sachs opinion, the per share merger consideration
to be paid to the holders of Common Stock (other than UHS and
its affiliates) pursuant to the
21
merger agreement was fair from a financial point of view to such
holders. During discussion of the UHS proposal and the
recommendation of the special committee, representatives of
Goldman Sachs received an
e-mail
from
the co-bidders increasing the per share purchase price being
offered by the co-bidders to $33.00. Mr. Jacobs then
suggested that the special committee should consider the
co-bidders revised proposal and request UHS to improve the
per share purchase price it proposed to pay to acquire the
Company. The board of directors determined that it would be
appropriate to temporarily adjourn the meeting to permit the
special committee to separately discuss the revised proposal
from the co-bidders.
A telephonic meeting of the special committee was convened
during which the special committee discussed the revised
proposal submitted by the co-bidders. After discussion, the
special committee concluded that while the co-bidders
proposal continued to be less favorable in terms of price and
closing certainty than the current proposal submitted by UHS, it
would be in the stockholders best interests to request
that UHS improve the financial terms of its offer in light of
the revised proposal from the co-bidders. The special committee
meeting was temporarily adjourned and Mr. Grant and
representatives of Goldman Sachs requested UHS to improve the
financial terms of its offer. UHS indicated that it would be
willing to increase its proposed purchase price, but only if it
could submit its revised proposal at a meeting of the board of
directors at which none of the non-independent directors were
present.
The special committee meeting was reconvened and the special
committee discussed UHS response. After further
discussion, the special committee unanimously agreed to
recommend to the board of directors that UHS be permitted to
submit its revised proposal at a meeting of the board of
directors at which Messrs. Jacobs and Petrie, the
non-independent directors, were not present. Representatives of
Goldman Sachs then confirmed the opinion rendered to the special
committee, which was subsequently confirmed in writing, to the
effect that, as of the date of the merger agreement and subject
to the factors and assumptions described in the opinion, the per
share merger consideration to be paid to the holders of shares
of Common Stock (other than UHS and its affiliates) pursuant to
the merger agreement was fair from a financial point of view to
such holders. The full text of the written opinion of Goldman
Sachs, dated May 16, 2010, which sets forth the assumptions
made, procedures followed, matters considered and limitations on
the review undertaken in connection with the opinion, is
attached as Annex B to this proxy statement.
When the meeting of the board of directors reconvened, the
special committee informed the board of directors of its
determination that the proposal from the co-bidders continued to
be inferior to the proposal from UHS. The special committee also
informed the board of directors that, in response to a request
from the special committee, UHS had indicated that it would
improve its proposal if it were permitted to present its revised
proposal at a meeting of the board of directors at which
Messrs. Jacobs and Petrie, the non-independent directors,
were not present. After discussion, Mr. Jacobs requested
that the independent directors and the special committees
advisors pursue the highest purchase price per share possible
from UHS, and Messrs. Jacobs and Petrie, the members of
senior management and representatives of Waller Lansden recused
themselves from the meeting. Counsel to UHS joined the meeting
and stated that UHS would increase its proposed per share
purchase price by $0.25 to $33.75. After discussion, the
Companys board of directors (other than
Messrs. Jacobs and Petrie, who had recused themselves)
unanimously approved and deemed advisable the merger and the
merger agreement with UHS, resolved to submit the merger
agreement to the Companys stockholders and to recommend
that the Companys stockholders adopt such merger
agreement. Thereafter, the Company, UHS and Merger Sub executed
the merger agreement.
Immediately prior to the end of the meeting of the board of
directors at which Messrs. Jacobs and Petrie were not
present, representatives of Goldman Sachs informed the
independent directors that the co-bidders had just informed them
that they would be willing to participate in a discussion to
solicit best and final offers from all bidders. The independent
directors discussed the communication from the co-bidders and
the fact that if either UHS or the co-bidders failed to
consummate a merger transaction with the Company, the
Companys sole remedy against the co-bidders would be to
seek payment from them of the reverse termination fee, whereas
the Company could pursue specific performance against UHS. As a
result, the agreement with UHS provided greater closing
certainty, and the special committee believed that it was
unlikely that the co-bidders would amend the terms of their
previous proposal to provide closing certainty comparable to
UHS. The special committee discussed the fact that when it
previously requested the co-bidders best, final proposal
the
22
co-bidders
made their $31.25 per share proposal and informed
representatives of Goldman Sachs that they could not increase
their proposal by a material amount. In addition, the special
committee discussed the fact that the communication from the
co-bidders provided no certainty that the co-bidders would
improve the financial and other terms of their offer to be
comparable to the agreement reached with UHS. Thereafter, the
independent directors directed representatives of Goldman Sachs
to inform the co-bidders that the Company had already reached an
agreement to sell the Company to a third party.
Reasons
for the Merger; Recommendation of the Special Committee and of
Our Board of Directors
The
Special Committee
The special committee, acting with the advice and assistance of
its independent legal and financial advisors, evaluated and
negotiated the merger proposal, including the terms and
conditions of the merger agreement, with UHS and Merger Sub. The
special committee unanimously determined that the merger is
advisable and that the terms of the merger are fair to and in
the best interests of the Company and its stockholders and
recommended to the board of directors that it approve and
declare advisable the merger and the merger agreement with UHS,
and that the board of directors submit the merger agreement to
the Companys stockholders and resolve to recommend that
the Companys stockholders adopt the merger agreement.
In the course of reaching its determination, the special
committee considered a number of substantive factors that the
special committee believed supported its decision, including the
following:
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its knowledge of the Companys business, operations,
financial condition, earnings and prospects, as well as the
risks in achieving those prospects;
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its belief that the merger is more favorable to the
Companys stockholders than any other alternative
reasonably available, including the alternative of remaining a
stand-alone, independent company and pursuing an initiative such
as a leveraged stock repurchase, as well as the potential
rewards, risks and uncertainties associated with those
alternatives;
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the current and historical market prices and trading multiples
of the Common Stock, including the trading multiples of the
Common Stock relative to those of other industry participants,
the fact that the cash merger price of $33.75 per share
represented a premium of approximately 41% to the closing share
price of the Common Stock on March 9, 2010, the last
trading day prior to the Companys issuance of a press
release announcing that it had been approached by third parties
regarding a potential sale;
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the financial analyses performed by Goldman Sachs in connection
with rendering its opinion to the special committee, and the
opinion rendered by Goldman Sachs that, as of May 16, 2010
and based upon and subject to the factors and assumptions set
forth in its opinion, the per share merger consideration of
$33.75 to be paid by UHS to the holders of shares of Common
Stock (other than UHS and its affiliates) pursuant to the merger
agreement was fair from a financial point of view to such
holders. The full text of the written opinion of Goldman Sachs,
dated May 16, 2010, which sets forth the assumptions made,
procedures followed, matters considered and limitations on the
review undertaken in connection with the opinion, is attached as
Annex B to this proxy statement;
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the fact that financial and other terms and conditions of the
merger agreement, including the level of commitment by UHS to
obtain applicable regulatory approvals and the absence of a
financing condition, were the product of extensive
arms-length negotiations among the parties and were
designed to provide as much certainty as was possible that the
merger would ultimately be consummated on a timely basis;
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the fact that if UHS or Merger Sub fails, or threatens to fail,
to satisfy their obligations under the merger agreement, the
Company is entitled to enforce any provision of the merger
agreement by a decree of specific performance and to temporary,
preliminary and permanent injunctive relief to prevent
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any such failure or threatened failure, in addition to any other
remedies to which the Company may be entitled;
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the fact that if the Company entered into a transaction with the
co-bidders and the co-bidders failed to consummate a merger
transaction with the Company, the Companys sole remedy
would be to seek payment from the co-bidders of a reverse
termination fee;
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the fact that 21 potential purchasers in addition to UHS were
contacted on behalf of the special committee to determine
whether they would be interested in potentially acquiring the
Company and that no other potential purchaser was prepared to
make an offer to acquire the Company on terms, including with
respect to price, as favorable to the Company and its
stockholders as those offered by UHS;
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the fact that on March 10, 2010 the media reported that the
Company was in talks with Bain Capital regarding an acquisition
of the Company and that on the same day the Company issued a
press release confirming that it had been approached by third
parties in connection with a potential acquisition, each of
which gave potential acquirors an opportunity to approach the
Company to propose a possible acquisition;
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the fact that the merger consideration is all cash, so that the
transaction allows the Companys stockholders to
immediately realize a fair value, in cash, for their investment
and provides such stockholders certainty of value for their
shares;
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the fact that, subject to compliance with the terms and
conditions of the merger agreement, the Company is permitted to
furnish information to, and participate in discussions and
negotiations with, any third party that makes an unsolicited
bona fide written proposal that constitutes or may reasonably be
expected to constitute a superior proposal;
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the fact that subject to compliance with the terms and
conditions of the merger agreement, the board of directors is
permitted to change its recommendation that the Companys
stockholders adopt the merger agreement or terminate the merger
agreement to enter into an agreement with respect to a superior
proposal prior to the adoption of the merger agreement by the
Companys stockholders upon the payment to UHS of a
termination fee of $71.5 million;
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the fact that the merger agreement must be adopted by the
affirmative vote of the holders of at least a majority of the
outstanding shares of Common Stock;
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the availability of appraisal rights to the holders of Common
Stock who comply with all of the procedures under Delaware law,
which allows such holders to seek appraisal of the fair value of
their shares as determined by the Delaware Chancery Court;
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the fact that negotiations were conducted under the oversight of
a special committee comprised solely of independent directors
who are not employees of the Company;
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the fact that the special committee retained and received advice
and assistance from its own independent financial and legal
advisors in evaluating, negotiating and recommending the terms
of the merger agreement; and
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the fact that the special committee had ultimate authority to
decide whether or not to proceed with a transaction or any
alternative thereto, subject to the board of directors
approval of the merger agreement.
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The special committee also considered a variety of risks and
other potentially negative factors concerning the merger
agreement and the merger, including the following:
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the fact that the Company will no longer exist as an independent
public company and its stockholders will no longer participate
in the growth, or benefit from any future appreciation in the
value, of the Company;
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the fact that the merger consideration represents a discount to
the highest price at which the Common Stock has traded in recent
years;
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24
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that, under the terms of the merger agreement, the Company
cannot solicit other acquisition proposals and must pay a
termination fee of $71.5 million in cash if the merger
agreement is terminated under certain circumstances specified in
the merger agreement, including if the Company terminates the
merger agreement to enter into an agreement with respect to a
superior proposal;
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the fact that certain provisions of the merger agreement may
have the effect of discouraging third parties from submitting a
superior proposal, including the requirement that the Company
provide UHS with an opportunity to propose revisions to the
merger agreement prior to being able to terminate the merger
agreement to accept a superior proposal;
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the fact that the merger might not be completed in a timely
manner or at all due to a failure to receive necessary
regulatory and other approvals, including under the HSR Act or
any state health care law or regulation;
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the restrictions on the conduct of the Companys business
prior to the consummation of the merger, which, subject to the
limitations specified in the merger agreement, may delay or
prevent the Company from taking certain actions during the time
that the merger agreement remains in effect;
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the risks and costs to the Company if the merger does not close,
including the diversion of management and employee attention,
potential employee attrition and the potential impact on the
Companys businesses;
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the interests that the Companys directors and executive
officers may have with respect to the merger, in addition to
their interests as stockholders of the Company generally, as
described in The Merger Interests of the
Companys Directors and Executive Officers in the
Merger;
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the significant costs involved in connection with negotiating
the merger agreement and completing the merger, the substantial
management time and effort required to effectuate the merger and
the related disruption to the Companys
day-to-day
operations during the pendency of the merger. If the merger is
not consummated, the Company may be required to bear such costs
and expenses;
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the risk that the pendency of the merger could adversely affect
the relationship between the Company and its employees,
physicians, patients, agents, vendors and others with whom it
has business dealings; and
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the fact that an all cash transaction would be taxable to the
Companys stockholders for U.S. federal income tax
purposes.
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The foregoing discussion summarizes the material factors
considered by the special committee in its consideration of the
merger. After considering these factors, the special committee
concluded that the positive factors relating to the merger
agreement and the merger outweighed the potential negative
factors. In view of the wide variety of factors considered by
the special committee, and the complexity of these matters, the
special committee did not find it practicable to quantify or
otherwise assign relative weights to the foregoing factors. In
addition, individual members of the special committee may have
assigned different weights to various factors. The special
committee approved and recommends the merger agreement and the
merger based upon the totality of the information it considered.
Our
Board of Directors
Our board of directors, acting upon the unanimous recommendation
of the special committee and without Messrs. Jacobs and
Petrie present, at a meeting described above on May 16,
2010, (i) determined that the merger agreement and the
transactions contemplated thereby, including the merger, are
advisable, fair to and in the best interests of the Company and
its stockholders, (ii) approved the merger agreement and
the transactions contemplated thereby, including the merger,
(iii) determined to submit the merger agreement to the
Companys stockholders for adoption and
(iv) recommended the adoption by the Companys
stockholders of the merger agreement. In reaching these
determinations, the board of directors (without the
participation of Messrs. Jacobs and Petrie) considered
(i) the fact that the special committee received an opinion
rendered by Goldman Sachs that the per share merger
consideration to be paid to the holders of shares of Common
Stock
25
(other than UHS and its affiliates) pursuant to the merger
agreement was fair from a financial point of view to such
holders as of May 16, 2010 (the full text of the written
opinion of Goldman Sachs, dated May 16, 2010, which sets
forth the assumptions made, procedures followed, matters
considered and limitations on the review undertaken in
connection with the opinion, is attached as Annex B to this
proxy statement) and the fact that representatives of Goldman
Sachs discussed with the special committee the financial
analyses performed by Goldman Sachs in connection with rendering
such opinion, and (ii) the unanimous recommendation and
analysis of the special committee, as described above, and
adopted such recommendation and analysis in reaching its
determinations.
The foregoing discussion summarizes the material factors
considered by the board of directors in its consideration of the
merger. In view of the wide variety of factors considered by our
board of directors, and the complexity of these matters, our
board of directors did not find it practicable to quantify or
otherwise assign relative weights to the foregoing factors. In
addition, individual members of the board of directors may have
assigned different weights to various factors. The board of
directors by unanimous action of the independent directors
approved and recommends the merger agreement and the merger
based upon the totality of the information it considered.
Our board of directors recommends that you vote
FOR the adoption of the merger agreement.
Opinion
of Goldman, Sachs & Co. as Financial Advisor to the
Special Committee
Goldman Sachs rendered its oral opinion to the special committee
of the board of directors of the Company (subsequently confirmed
in writing) to the effect that, as of May 16, 2010 and
based upon and subject to the factors and assumptions set forth
in its written opinion, the per share merger consideration to be
paid to the holders of shares of Common Stock (other than UHS
and its affiliates) pursuant to the merger agreement was fair
from a financial point of view to those holders.
The full text of the written opinion of Goldman Sachs, dated
May 16, 2010, which sets forth assumptions made, procedures
followed, matters considered and limitations on the review
undertaken in connection with the opinion, is attached as
Annex B to this proxy statement. Goldman Sachs provided its
opinion for the information and assistance of the special
committee in connection with its consideration of the
transaction contemplated by the merger agreement. The Goldman
Sachs opinion does not constitute a recommendation as to how any
stockholder of the Company should vote with respect to the
merger or any other matter.
In connection with rendering the opinion described above and
performing its related financial analyses, Goldman Sachs
reviewed, among other things:
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the merger agreement;
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annual reports to stockholders and Annual Reports on
Form 10-K
of the Company for the five fiscal years ended December 31,
2009;
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certain interim reports to stockholders and Quarterly Reports on
Form
10-Q
of
the Company;
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certain other communications from the Company to its
stockholders;
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certain publicly available research analyst reports for the
Company; and
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certain internal operating forecasts for the Company prepared by
its management, and capital structure assumptions provided by
the special committee (the special committees
capital structure assumptions), each as approved for
Goldman Sachs use by the special committee.
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Goldman Sachs also held discussions with members of the senior
management of the Company regarding their assessment of the past
and current business operations, financial condition and future
prospects of the Company; reviewed the reported price and
trading activity for the shares of the Common Stock; compared
certain financial and stock market information for the Company
with similar information for certain other companies with
publicly traded securities; reviewed the financial terms of
certain recent business combinations
26
in the behavioral health industry specifically and in other
industries generally; and performed such other studies and
analyses, and considered such other factors, as it deemed
appropriate.
For purposes of rendering its opinion described above, Goldman
Sachs relied upon and assumed, without assuming any
responsibility for independent verification, the accuracy and
completeness of all of the financial, legal, regulatory, tax,
accounting and other information provided to, discussed with or
reviewed by it, and Goldman Sachs did not assume any
responsibility for any such information. In that regard, Goldman
Sachs assumed with the consent of the special committee that the
internal operating forecasts for the Company prepared by its
management, and approved for Goldman Sachs use by the
special committee, were reasonably prepared on a basis
reflecting the best currently available estimates and judgments
of the management of the Company. Goldman Sachs did not make an
independent evaluation or appraisal of the assets and
liabilities (including any contingent, derivative or other
off-balance-sheet assets and liabilities) of the Company or any
of its subsidiaries, nor was any evaluation or appraisal of the
assets or liabilities of the Company or any of its subsidiaries
furnished to Goldman Sachs. Goldman Sachs assumed that all
governmental, regulatory or other consents and approvals
necessary for the consummation of the merger will be obtained
without any adverse effect on the expected benefits of the
merger in any way meaningful to its analysis. Goldman Sachs also
assumed that the merger will be consummated on the terms set
forth in the merger agreement, without the waiver or
modification of any term or condition the effect of which would
be in any way meaningful to its analysis.
Goldman Sachs opinion did not address the underlying
business decision of the Company to engage in the merger, or the
relative merits of the merger compared to any strategic
alternatives that may be available to the Company; nor did it
address any legal, regulatory, tax or accounting matters.
Goldman Sachs opinion addresses only the fairness from a
financial point of view, as of May 16, 2010, of the $33.75
per share in cash to be paid to the holders of the shares of
Common Stock (other than UHS and its affiliates) pursuant to the
merger agreement.
Goldman Sachs opinion did not express any view on, and did
not address, any other term or aspect of the merger agreement or
the merger or any term or aspect of any other agreement or
instrument contemplated by the merger agreement or entered into
or amended in connection with the merger, including, without
limitation, the fairness of the merger to, or any consideration
received in connection therewith by, the holders of any other
class of securities, creditors, or other constituencies of the
Company; nor as to the fairness of the amount or nature of any
compensation to be paid or payable to any of the officers,
directors or employees of the Company, or class of such persons,
in connection with the merger, whether relative to the $33.75
per share in cash to be paid to the holders of shares of Common
Stock (other than UHS and its affiliates) pursuant to the merger
agreement or otherwise. Goldman Sachs did not express any
opinion as to the impact of the merger on the solvency or
viability of the Company or UHS or the ability of the Company or
UHS to pay its obligations when they come due. Goldman
Sachs opinion was necessarily based on economic, monetary,
market and other conditions as in effect on, and the information
made available to it as of, the date of the opinion, and Goldman
Sachs assumed no responsibility for updating, revising or
reaffirming its opinion based on circumstances, developments or
events occurring after the date of its opinion. Goldman
Sachs opinion was approved by a fairness committee of
Goldman Sachs.
The following is a summary of the material financial analyses
performed by Goldman Sachs in connection with rendering the
opinion described above. The following summary, however, does
not purport to be a complete description of the financial
analyses performed by Goldman Sachs, nor does the order of
analyses described represent relative importance or weight given
to those analyses by Goldman Sachs. Some of the summaries of the
financial analyses include information presented in tabular
format. The tables must be read together with the full text of
each summary and are alone not a complete description of Goldman
Sachs financial analyses. Except as otherwise noted, the
following quantitative information, to the extent that it is
based on market data, is based on market data as it existed on
or before May 14, 2010, and is not necessarily indicative
of current market conditions.
27
Analysis of Implied Premia and
Multiples.
Goldman Sachs calculated that the
$33.75 per share in cash to be paid to the stockholders of the
Company pursuant to the merger agreement represented implied
premia of:
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41.2% to the $23.91 closing price of the Companys shares
on March 9, 2010, the last trading day before the Company
first announced that it had been approached by third parties in
connection with a potential acquisition of the Company (the
undisturbed price); and
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3.4% to the $32.63 closing price of the Companys shares on
May 14, 2010, the last trading day before the announcement
of the merger by the Company.
|
Goldman Sachs also calculated the following implied multiples
for the Company:
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enterprise value as a multiple of earnings before interest,
taxes, depreciation and amortization (EBITDA) for
the twelve-month period ending March 31, 2010 (the
LTM period) and estimates of EBITDA for 2010 and
2011; and
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share price as a multiple of estimates of earnings per share
(EPS) for 2010 and 2011.
|
Goldman Sachs calculated these multiples using enterprise values
for the Company based upon and using share prices for the
Company equal to:
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$33.75, the price per share being paid in the merger;
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$23.91, the undisturbed price of the Companys
shares; and
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$32.63, the May 14, 2010 closing price for the
Companys shares.
|
The enterprise values for the Company used by Goldman Sachs were
calculated by multiplying each of the foregoing share prices by
the number of fully diluted outstanding shares of the Company,
adjusted to reflect the special committees capital
structure assumptions, and adding to the result the Company
managements estimate of the Companys net debt (total
debt less cash and cash equivalents) as of June 30, 2010,
adjusted to reflect the special committees capital
structure assumptions, and the Company managements
estimate of the Companys minority interest amount as of
June 30, 2010. The special committees capital
structure assumptions reflected an increase in the
Companys total indebtedness of approximately
$500 million and the repurchase by the Company of
approximately 30% of its outstanding shares. For the foregoing
multiple calculations, Goldman Sachs utilized the EBITDA results
for the Company for the LTM period adjusted to reflect the
special committees capital structure assumptions and
estimates for 2010 and 2011 derived by applying the special
committees capital structure assumptions to both Company
managements operating forecasts and estimates derived from
the median estimates for the Company most recently published by
Institutional Brokers Estimate System (IBES)
as of May 14, 2010.
Goldman Sachs compared the multiples it calculated for the
Company to the median of similar multiples it calculated for the
following publicly traded corporations in the health care
services industry (the selected health care services
companies):
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Acute Care Hospitals
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Other Alternative Site/Post-Acute Facilities
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Community Health Systems, Inc.
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AmSurg Corp.
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Health Management Associates, Inc.
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DaVita Inc.
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LifePoint Hospitals, Inc.
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HealthSouth Corporation
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Tenet Healthcare Corporation
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Select Medical Holdings Corporation
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Universal Health Services, Inc.
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Although none of the selected health care services companies is
directly comparable to the Company, these companies were chosen
because they are publicly traded companies in the health care
services industry with operations and equity market values that
for purposes of analysis may be considered similar to the
current operations and equity market value of the Company.
28
For purposes of calculating multiples for the selected health
care services companies, Goldman Sachs utilized an enterprise
value for each company calculated by multiplying the number of
fully diluted outstanding shares of that company derived from
the companys most recent public filings with the SEC by
that companys closing share price on May 14, 2010,
and adding to that result the companys net debt (total
debt less cash and cash equivalents) as reflected in its most
recent public filings with the SEC. For purposes of its
calculations with respect to the selected health care services
companies, Goldman Sachs utilized each companys EBITDA
results for the LTM period derived from its most recent public
filings with the SEC and estimates for each company derived from
the median estimates for that company most recently published by
IBES as of May 14, 2010.
The following table shows the multiples Goldman Sachs calculated
for the Company and the median of similar multiples it
calculated for the selected health care services companies:
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Company, Based on
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Company, Based
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$32.63
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Other
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on $33.75
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Company, Based on
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Closing Price on
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Alternative Site/
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Merger
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$23.91
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May 14,
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Acute Care
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Post-Acute
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Consideration
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Undisturbed Price
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2010
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Hospitals
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Facilities
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Management Forecasts
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Enterprise Value as a Multiple of:
|
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EBITDA for LTM Period
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9.8
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x
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8.4
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x
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9.6
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x
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6.9
|
x
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8.6
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x
|
2010 Estimated EBITDA
|
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9.4
|
x
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8.1
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x
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9.3
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x
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7.0
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x
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7.8
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x
|
2011 Estimated EBITDA
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8.9
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x
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7.6
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x
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8.7
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x
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6.7
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x
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7.4
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x
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Share Price as Multiple of:
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2010 Estimated EPS
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14.7
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x
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10.4
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x
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14.3
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x
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15.0
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x
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13.1
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x
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2011 Estimated EPS
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12.8
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x
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9.1
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x
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12.4
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x
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13.6
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x
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11.7
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x
|
IBES Estimates
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Enterprise Value as a Multiple of:
|
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EBITDA for LTM Period
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9.8
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x
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8.4
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x
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9.6
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x
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6.9
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x
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8.6
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x
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2010 Estimated EBITDA
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9.5
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x
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8.1
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x
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9.3
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x
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7.0
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x
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7.8
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x
|
2011 Estimated EBITDA
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9.0
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x
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7.7
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x
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8.8
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x
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6.7
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x
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7.4
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x
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Share Price as Multiple of:
|
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2010 Estimated EPS
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14.3
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x
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10.1
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x
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13.8
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x
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15.0
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x
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13.1
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x
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2011 Estimated EPS
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12.4
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x
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8.8
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x
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12.0
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x
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13.6
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x
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11.7
|
x
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Illustrative Present Value of Future Share
Prices.
Goldman Sachs performed an illustrative
analysis of the implied present value of the future price per
share of the Common Stock. This analysis is intended to provide
an indication of implied present values of theoretical future
share prices of the Common Stock. For purposes of this analysis,
Goldman Sachs first derived theoretical future share prices for
the Common Stock for each of the years from 2010 through 2015 by
applying illustrative forward price per share as multiples
(P/E multiples) of estimated EPS of 9.0x and 13.0x
to EPS estimates derived by applying the special
committees capital structure assumptions to the Company
managements operating forecasts for each of those years.
The illustrative forward P/E multiples utilized for purposes of
this analysis were selected by Goldman Sachs based on its
professional judgment and experience taking into account current
and historical trading data and current P/E multiples for the
Company. By applying illustrative discount rates of 10.5% and
12.0%, reflecting estimates of the Companys cost of
equity, to the theoretical future share prices, Goldman Sachs
derived implied present values per share of Common Stock ranging
from $19.48 to $31.42.
Illustrative Discounted Cash Flow
Analysis.
Goldman Sachs performed an illustrative
discounted cash flow analysis utilizing estimates of the
Companys unlevered free cash flow for the period from
January 1, 2010 through December 31, 2015 derived from
Company managements operating forecasts for those years to
determine illustrative ranges of implied present values per
share of Common Stock as of April 1, 2010.
29
Using discount rates ranging from 7.5% to 9.0%, reflecting
estimates of the Companys weighted average cost of
capital, Goldman Sachs derived illustrative ranges of implied
present values per share of the Common Stock by discounting to
present value (a) estimates of the Companys unlevered
free cash flows for the period from January 1, 2010 through
December 31, 2015 and (b) illustrative terminal values
for the Company as of December 31, 2015 derived by applying
perpetuity growth rates ranging from 2.0% to 3.0% to estimates
of the Companys unlevered free cash flows for 2015.
Based on the forgoing calculations, Goldman Sachs derived an
illustrative range of implied present values of $22.67 to $43.18
per share of the Common Stock.
Selected Companies Analysis.
Goldman Sachs
reviewed and compared certain public financial information for
the Company to corresponding financial information, ratios and
public market multiples for the selected health care services
companies. Although none of the selected health care services
companies are directly comparable to the Company, the selected
health care services companies were chosen by Goldman Sachs
because they are publicly traded companies with operations that
for purposes of analysis may be considered similar to certain
operations of the Company.
Goldman Sachs compared the following multiples it calculated for
the Company based on the closing price per share on May 14,
2010, the last trading day prior to the announcement of the
merger agreement, to similar multiples it calculated for the
selected health care services companies:
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enterprise value as a multiple of actual EBITDA for the LTM
period and estimated EBITDA for 2010 and 2011;
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P/E multiple of estimated EPS for 2010, 2011 and 2012; and
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|
ratio of 2011 P/E multiple to estimated five-year cumulative
average EPS growth rate (the
2011 PE/5-Year
EPS CAGR).
|
All of these multiples for the Company and the selected health
care services companies were calculated using estimates for each
company derived from the median estimates for that company most
recently published by IBES as of May 14, 2010.
The results of these calculations are summarized as follows:
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Enterprise Value/EBITDA
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P/E Multiple
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2011 PE /5-Year
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LTM
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EPS
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Period
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2010
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2011
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2010
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2011
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2012
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CAGR
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Company
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9.5
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x
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9.2
|
x
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8.7
|
x
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|
14.1
|
x
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|
13.1
|
x
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12.3
|
x
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0.9
|
x
|
Acute Care Hospitals
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High
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7.7
|
x
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7.5
|
x
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|
7.2
|
x
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|
18.1
|
x
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|
20.0
|
x
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17.8
|
x
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|
2.0
|
x
|
Mean
|
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|
7.1
|
x
|
|
|
7.0
|
x
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|
6.6
|
x
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15.0
|
x
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|
14.3
|
x
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|
13.1
|
x
|
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|
1.4
|
x
|
Median
|
|
|
6.9
|
x
|
|
|
7.0
|
x
|
|
|
6.7
|
x
|
|
|
15.0
|
x
|
|
|
13.6
|
x
|
|
|
12.3
|
x
|
|
|
1.4
|
x
|
Low
|
|
|
6.5
|
x
|
|
|
6.5
|
x
|
|
|
6.2
|
x
|
|
|
12.8
|
x
|
|
|
11.9
|
x
|
|
|
11.1
|
x
|
|
|
0.9
|
x
|
Other Alternative Site/Post-Acute Facilities
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
10.8
|
x
|
|
|
9.4
|
x
|
|
|
8.8
|
x
|
|
|
14.3
|
x
|
|
|
13.5
|
x
|
|
|
11.3
|
x
|
|
|
1.4
|
x
|
Mean
|
|
|
9.0
|
x
|
|
|
8.1
|
x
|
|
|
7.6
|
x
|
|
|
13.1
|
x
|
|
|
11.9
|
x
|
|
|
10.1
|
x
|
|
|
1.1
|
x
|
Median
|
|
|
8.6
|
x
|
|
|
7.8
|
x
|
|
|
7.4
|
x
|
|
|
13.1
|
x
|
|
|
11.7
|
x
|
|
|
9.6
|
x
|
|
|
1.1
|
x
|
Low
|
|
|
7.8
|
x
|
|
|
7.4
|
x
|
|
|
6.6
|
x
|
|
|
12.0
|
x
|
|
|
10.6
|
x
|
|
|
9.4
|
x
|
|
|
0.7
|
x
|
30
Selected Precedent Transactions
Analysis.
Goldman Sachs analyzed certain publicly
available information relating to the following 13 selected
transactions that involved companies in the health care services
industry that were announced since 2004 and involved aggregate
enterprise value of at least $430 million:
|
|
|
|
|
Date Announced
|
|
Acquiror
|
|
Target
|
|
April 2007
|
|
Crestview Partners, L.P.
|
|
Symbion, Inc.
|
March 2007
|
|
TPG Partners V, L.P.
|
|
HealthSouth Corporation (Surgery)
|
March 2007
|
|
Community Health Systems, Inc.
|
|
Triad Hospitals, Inc.
|
January 2007
|
|
Welsh, Carson, Anderson & Stowe X, L.P.
|
|
United Surgical Partners International, Inc.
|
December 2006
|
|
Psychiatric Solutions, Inc.
|
|
Horizon Health Corporation
|
July 2006
|
|
Private Investment Funds affiliated with Bain Capital Partners,
LLC, Kohlberg Kravis Roberts & Co. L.P. and Merrill Lynch
Global Private Equity
|
|
HCA Inc.
|
March 2006
|
|
Vestar Capital Partners V, L.P.
|
|
National Mentor Holdings, Inc.
|
October 2005
|
|
Bain Capital Partners, LLC
|
|
CRC Health Corporation
|
March 2005
|
|
Psychiatric Solutions, Inc.
|
|
Ardent Health Services LLC (Behavioral)
|
December 2004
|
|
DaVita Inc.
|
|
Gambro Healthcare, Inc.
|
August 2004
|
|
LifePoint Hospitals, Inc.
|
|
Province Healthcare Company
|
July 2004
|
|
The Blackstone Group
|
|
Vanguard Health Systems, Inc.
|
May 2004
|
|
Texas Pacific Group and JLL Partners
|
|
IASIS Healthcare Corporation
|
While none of the selected transactions is directly comparable
to the transaction between the Company and UHS, the aggregate
equity consideration paid in the selected transactions and the
companies that participated in the selected transactions are
such that, for purposes of analysis, the transactions may be
considered similar to the transaction between the Company and
UHS.
Goldman Sachs calculated and reviewed the enterprise value of
the target company as a multiple of EBITDA for the four-quarter
period prior to the announcement of the applicable transaction
(LTM EBITDA). For purposes of this analysis, the
target companies enterprise values were calculated by
multiplying the announced per-share transaction price by the
number of that companys fully diluted outstanding shares
as disclosed in the companys most recent filings with the
SEC prior to the announcement of the applicable transaction and
adding to that result the companys net debt as disclosed
in the companys most recent public filings with the SEC
prior to the announcement of the applicable transaction.
The results of this analysis are summarized as follows:
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|
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|
|
|
|
Enterprise Value as a
|
|
|
Multiple of LTM EBITDA
|
|
Mean of Selected Transactions
|
|
|
10.5
|
x
|
Median of Selected Transactions
|
|
|
10.6
|
x
|
General.
The preparation of a fairness opinion
is a complex process and is not necessarily susceptible to
partial analysis or summary description. Selecting portions of
the analyses or of the summary set forth above, without
considering the analyses as a whole, could create an incomplete
view of the processes underlying Goldman Sachs opinion. In
arriving at its fairness determination, Goldman Sachs considered
the results of all of its analyses and did not attribute any
particular weight to any factor or analysis considered by it.
Rather, Goldman Sachs made its determination as to fairness on
the basis of its experience and professional judgment after
considering the results of all of its analyses. No company or
transaction used in the above analyses as a comparison is
directly comparable to the Company or the contemplated merger.
31
Goldman Sachs prepared these analyses for purposes of providing
its opinion to the special committee that, as of May 16,
2010 and based upon and subject to the factors and assumptions
set forth therein, the $33.75 per share in cash to be paid to
the holders of shares of Common Stock (other than UHS and its
affiliates) pursuant to the merger agreement was fair from a
financial point of view to those holders. These analyses do not
purport to be appraisals nor do they necessarily reflect the
prices at which businesses or securities actually may be sold.
Analyses based upon forecasts of future results are not
necessarily indicative of actual future results, which may be
significantly more or less favorable than suggested by these
analyses. Because these analyses inherently are subject to
uncertainty, being based upon numerous factors or events beyond
the control of the parties or their respective advisors, none of
the Company, UHS, Goldman Sachs or any other person assumes
responsibility if future results are materially different from
those forecast.
The merger consideration of $33.75 per share in cash was
determined through arms-length negotiations between the
special committee and UHS and, consistent with the
recommendation of the special committee, was approved by the
board of directors of the Company. Goldman Sachs provided advice
to the special committee during these negotiations. Goldman
Sachs did not, however, recommend any specific amount of
consideration to the Company, the special committee or the board
of directors or that any specific amount of consideration
constituted the only appropriate consideration for the merger.
As described above, Goldman Sachs opinion to the special
committee was one of many factors taken into consideration by
the special committee in making its determination to recommend
that the board of directors approve the merger agreement and by
the board of directors in making its determination to approve
the merger agreement. The foregoing summary does not purport to
be a complete description of the analyses performed by Goldman
Sachs in connection with the fairness opinion and is qualified
in its entirety by reference to the written opinion of Goldman
Sachs attached as Annex B to this proxy statement.
Goldman Sachs and its affiliates are engaged in investment
banking and financial advisory services, commercial banking,
securities trading, investment management, principal investment,
financial planning, benefits counseling, risk management,
hedging, financing, brokerage activities and other financial and
non-financial activities and services for various persons and
entities. In the ordinary course of these activities and
services, Goldman Sachs and its affiliates may at any time make
or hold long or short positions and investments, as well as
actively trade or effect transactions, in the equity, debt and
other securities (or related derivative securities) and
financial instruments (including bank loans and other
obligations) of third parties, the Company, UHS or any of their
respective affiliates or any currency or commodity that may be
involved in the merger for their own account and for the
accounts of their customers. Goldman Sachs acted as financial
advisor to the special committee in connection with, and
participated in certain of the negotiations leading to, the
merger. Goldman Sachs has not otherwise been engaged to provide
investment banking or other financial services to the Company
during the two-year period ending May 16, 2010. Goldman
Sachs has provided certain investment banking and other
financial services to UHS and its affiliates from time to time
for which the investment banking division of Goldman Sachs has
received, and may receive, compensation, including having acted
as co-manager with respect to UHS offering of
7.125% Notes due 2016 (aggregate principal amount of
$150,000,000) in May 2008. Goldman Sachs also may provide
investment banking and other financial services to the Company
and UHS and their respective affiliates in the future for which
the investment banking division of Goldman Sachs may receive
compensation.
The special committee selected Goldman Sachs as its financial
advisor because it is an internationally recognized investment
banking firm that has substantial experience in transactions
similar to the merger. Pursuant to a letter agreement, dated
March 8, 2010, the special committee engaged Goldman Sachs
to act as its financial advisor in connection with the
contemplated merger. Pursuant to the terms of this engagement
letter, the Company has agreed to pay Goldman Sachs a fee of
approximately $20 million for its services in connection
the transaction, the principal portion of which is contingent
upon consummation of the transaction. In addition, the Company
has agreed to reimburse Goldman Sachs for its expenses,
including attorneys fees and disbursements, and to
indemnify Goldman Sachs and related persons against various
liabilities, including certain liabilities under the federal
securities laws.
32
Certain
Financial Projections
The Company does not as a matter of course prepare or make
public long-term projections as to future revenues, earnings or
other results due to, among other reasons, the uncertainty of
the underlying assumptions and estimates. In particular, the
yearly fluctuations in federal and state budgets directly impact
our revenue since the majority of our revenue comes from the
Medicare and Medicaid programs and various state agencies,
making it difficult to accurately forecast our results. The
Company has followed this practice since its inception. At the
request of the special committee, however, the Companys
management developed a five-year business plan for the Company
(the financial projections). In developing the
financial projections, the Companys management discussed
the financial projections with the special committee and Goldman
Sachs. The financial projections were subsequently disclosed to
UHS and other parties that expressed an interest in pursuing a
potential transaction involving the sale of the Company. None of
the Company, UHS or their respective affiliates assumes any
responsibility for the accuracy of the financial projections.
The financial projections set forth below are included in this
proxy statement solely because this information was provided to
Goldman Sachs and to UHS (and other interested bidders), and not
to influence your decision as to whether to vote for the
proposal to adopt the merger agreement.
The inclusion of the
financial projections in this proxy statement should not be
regarded as an indication that the Company, the board of
directors, the special committee, Goldman Sachs, UHS or any
other recipient of the financial projections considered, or now
considers, them to be material or to be reliable predictions of
future results, and they should not be relied upon as such.
At the time the financial projections set forth below were
prepared, the projections represented the best estimates and
judgments of the Companys management concerning the future
financial performance of the Company. While the financial
projections were prepared in good faith, they are
forward-looking statements that are subjective in many respects,
and reflect numerous judgments, estimates and assumptions that
are inherently uncertain, many of which are beyond the
Companys control, including estimates and assumptions
regarding general economic conditions, federal and state
budgets, unemployment levels and payrolls and the impact of such
factors on the Companys business and its behavioral health
facilities. Important factors that may affect actual results and
cause the financial projections not to be accurate include, but
are not limited to, employment trends, risks and uncertainties
relating to the Companys business (including its ability
to achieve strategic goals, objectives and targets over the
applicable periods), industry performance, government
regulation, the rate at which the Company is reimbursed by the
federal and state governments and other third parties for its
services, general business and economic conditions, competition
and other factors described under the captions Risk
Factors and Forward-Looking Statements in our
most recent annual and quarterly reports filed with the SEC on
Forms 10-K
and
10-Q,
respectively, and under Special Note Regarding
Forward-Looking Statements beginning on page 11 of
this proxy statement. In addition, the financial projections do
not reflect any events that could affect the Companys
prospects, including changes in general business or economic
conditions, the passage of health care reform bills by the
U.S. Congress or any other transaction or event that has
occurred since, or that may occur and that was not anticipated
at, the time the financial projections were prepared. The
financial projections also cover multiple years and by their
nature become subject to greater uncertainty with each
successive year. There can be no assurance that the financial
projections are or will be accurate or that the Companys
future financial results will not vary, even materially, from
the financial projections. None of the Company, UHS or their
respective affiliates, representatives or agents undertakes any
obligation to update or otherwise to revise the financial
projections to reflect circumstances existing or arising after
the date such financial projections were generated or to reflect
the occurrence of future events, even if any or all of the
underlying estimates and assumptions are shown to be in error or
to have changed.
33
Set forth below is a summary of the financial projections which
were provided to UHS (and other interested bidders) in their
respective evaluations of a possible transaction with the
Company.
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Fiscal Year Ending December 31,
|
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CAGR
|
|
|
2007A
|
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2008A
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2009A
|
|
2010E
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2011E
|
|
2012E
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2013E
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2014E
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|
2015E
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07A-09A
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|
10E-15E
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|
Net Revenues
|
|
$
|
1,415
|
|
|
$
|
1,696
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|
|
$
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1,805
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|
|
$
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1,896
|
|
|
$
|
1,983
|
|
|
$
|
2,073
|
|
|
$
|
2,167
|
|
|
$
|
2,267
|
|
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$
|
2,381
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|
|
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13.0
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%
|
|
|
4.7
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%
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Adjusted EBITDA(1)
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|
$
|
251
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|
|
$
|
305
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|
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$
|
329
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|
|
$
|
351
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|
|
$
|
372
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|
|
$
|
394
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|
|
$
|
416
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|
|
$
|
440
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|
|
$
|
476
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|
|
|
14.5
|
%
|
|
|
6.3
|
%
|
EBITDA(2)
|
|
$
|
235
|
|
|
$
|
285
|
|
|
$
|
311
|
|
|
$
|
332
|
|
|
$
|
353
|
|
|
$
|
374
|
|
|
$
|
395
|
|
|
$
|
418
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|
|
$
|
453
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|
|
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15.2
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%
|
|
|
6.4
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%
|
Diluted EPS
|
|
$
|
1.37
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|
|
$
|
1.87
|
|
|
$
|
2.14
|
|
|
$
|
2.25
|
|
|
$
|
2.42
|
|
|
$
|
2.53
|
|
|
$
|
2.77
|
|
|
$
|
3.05
|
|
|
$
|
3.41
|
|
|
|
24.8
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%
|
|
|
8.7
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%
|
|
|
|
(1)
|
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Adjusted EBITDA is defined as income from continuing operations
before interest expense (net of interest income), income taxes,
depreciation, amortization, stock compensation and other
expenses.
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(2)
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EBITDA is defined as income from continuing operations
attributable to stockholders before interest expense (net of
interest income), income taxes, depreciation and amortization.
|
As described in the section entitled Opinion of Goldman,
Sachs & Co. as Financial Advisor to the Special
Committee beginning on page 26, at the direction of
the special committee, Goldman Sachs performed its financial
analyses in connection with the rendering of its fairness
opinion to the special committee using the above summary
financial projections and certain capital structure assumptions
provided by the special committee. The special committees
capital structure assumptions reflected an increase in the
Companys total indebtedness of approximately
$500 million and the repurchase by the Company of
approximately 30% of its outstanding shares, which resulted in
diluted EPS amounts for the years 2010E-2015E of $2.29, $2.63,
$2.86, $3.09, $3.41 and $3.98, respectively, which amounts were
used by Goldman Sachs to perform its financial analyses in
connection with the rendering of its fairness opinion to the
special committee.
Each of Adjusted EBITDA and EBITDA is not a measure recognized
by U.S. generally accepted accounting principles
(GAAP). Non-GAAP financial measures are not intended
to be substitutes for any GAAP financial measure and, as
calculated, may not be comparable to similarly titled measures
of other companies.
The financial projections should be read together with the
historical financial statements of the Company, which have been
filed with the SEC. See Where You Can Find More
Information on page 68. The financial projections
were not prepared with a view toward public disclosure and,
accordingly, do not comply with published guidelines of the SEC,
the Public Company Accounting and Oversight Board or the
American Institute of Certified Public Accountants for
preparation and presentation of prospective financial
information. Neither our independent registered public
accounting firm nor any other independent accountant has
compiled, examined or performed any procedures with respect to
the prospective financial information contained in the financial
projections, nor have they expressed any opinion or given any
form of assurance on the financial projections or their
achievability, and accordingly assume no responsibility for them
or their achievability.
There can be no assurance that any financial projections will
be, or are likely to be, realized, or that the assumptions on
which they are based will prove to be, or are likely to be,
correct. None of the Company, UHS or their respective
affiliates, advisors, officers, directors or representatives has
made or makes any representation to any stockholders or any
other person regarding the ultimate performance of the Company
compared to the financial projections set forth above. The
Company has not made any representation to UHS, in the merger
agreement or otherwise, concerning the financial projections.
You are cautioned not to place undue reliance on this
information in making a decision as to whether to vote for the
proposal to adopt the merger agreement.
Certain
Effects of the Merger
If the merger agreement is adopted by the Companys
stockholders and the other conditions to the closing of the
merger are either satisfied or waived, Merger Sub will be merged
with and into the Company, with the Company being the surviving
corporation and becoming a wholly-owned subsidiary of UHS.
34
Upon the consummation of the merger, each share of Common Stock
issued and outstanding immediately prior to the effective time
of the merger (other than shares held in the treasury of the
Company, shares owned by UHS or Merger Sub immediately prior to
the effective time of the merger or shares held by stockholders
who are entitled to, and who properly exercise, appraisal rights
under Delaware law) will be converted into the right to receive
$33.75 in cash, without interest and less any applicable
withholding taxes. Upon the consummation of the merger, all
outstanding options to acquire Common Stock will become fully
vested and exercisable (to the extent not already vested and
exercisable) and will be cancelled and converted into the right
to receive a cash payment equal to the number of shares of
Common Stock underlying the option multiplied by the amount (if
any) by which $33.75 exceeds the applicable option exercise
price, without interest and less any applicable withholding
taxes. Upon the consummation of the merger, each outstanding
share of restricted Common Stock will become fully vested and
transferable and cancelled and converted into the right to
receive $33.75 in cash, without interest and less any applicable
withholding taxes.
The Common Stock currently is registered under the Exchange Act
and is traded on the NASDAQ under the symbol PSYS.
As a result of the merger, the Company will be a wholly-owned
subsidiary of UHS, and there will be no public market for its
common stock. After the merger, the Common Stock will cease to
be traded on the NASDAQ, and price quotations with respect to
sales of shares of common stock in the public market no longer
will be available. In addition, registration of the Common Stock
under the Exchange Act will be terminated.
At the effective time of the merger, the directors of Merger Sub
will become the directors of the surviving corporation, and the
current officers of the Company will become the initial officers
of the surviving corporation. The amended and restated
certificate of incorporation of the Company will be amended and
restated as provided in the merger agreement. The by-laws of the
Company will be amended and restated as provided in the merger
agreement.
Effects
on the Company if the Merger is Not Completed
If the merger agreement is not adopted by our stockholders or if
the merger is not completed for any other reason, stockholders
will not receive any payment for their shares in connection with
the merger. Instead, we will remain an independent public
company and the Common Stock will continue to be listed and
traded on the NASDAQ. In addition, if the merger is not
completed, we expect that management will operate the business
in a manner similar to that in which it is being operated today
and that our stockholders will continue to be subject to the
same risks and opportunities as they currently are, including,
among other things, in connection with the nature of the
behavioral health care industry on which our business largely
depends, and general industry, economic, regulatory and market
conditions. Accordingly, if the merger is not consummated, there
can be no assurance as to the effect of these risks and
opportunities on the future value of your shares of Common
Stock. From time to time, our board of directors (acting through
the special committee or otherwise) will evaluate and review,
among other things, the business, operations, properties,
dividend policy and capitalization of the Company and make such
changes as are deemed appropriate and continue to seek to
identify strategic alternatives to enhance stockholder value. If
the merger agreement is not adopted by our stockholders or if
the merger is not consummated for any other reason, there can be
no assurance that any other transaction acceptable to us will be
offered, or that the business, prospects or results of
operations of the Company will not be adversely impacted.
Delisting
and Deregistration of Common Stock
If the merger is completed, the Common Stock will be delisted
from the NASDAQ and deregistered under the Exchange Act. We will
no longer file periodic reports with the SEC on account of the
Common Stock.
Regulatory
Approvals
Under the HSR Act and related rules, the merger cannot be
completed until the Company and UHS file a notification and
report form with the FTC and the Antitrust Division of the DOJ
and the applicable waiting
35
period has expired or been terminated. The Company and UHS filed
their respective notification and report forms under the HSR Act
with the FTC and the Antitrust Division of the DOJ on
May 28, 2010. The initial HSR Act 30-day waiting period was
set to expire on June 28, 2010. After discussions with the
FTC, UHS withdrew its notification and report form effective as
of June 25, 2010, and refiled on June 28, 2010.
Refiling restarted the initial HSR Act
30-day
waiting period. That HSR Act waiting period will expire at
11:59 p.m., Eastern Time, on July 28, 2010, unless
earlier terminated or extended. At any time before or after
consummation of the merger, the Antitrust Division of the DOJ or
the FTC could take such action under the antitrust laws as it
deems necessary or desirable in the public interest, including
seeking to enjoin the consummation of the merger or seeking
divestiture of substantial assets of the Company or UHS. At any
time before or after the consummation of the merger, any state
could take such action under the antitrust laws as it deems
necessary or desirable in the public interest. Such action could
include seeking to enjoin the consummation of the merger or
seeking divestiture of substantial assets of the Company or UHS.
Private parties also may seek to take legal action under the
antitrust laws under certain circumstances. There can be no
assurance that a challenge to the merger on antitrust grounds
will not be made or, if such a challenge is made, that it would
not be successful.
It is possible that the FTC or the Antitrust Division of the DOJ
may seek additional regulatory concessions or impose additional
conditions or states or private parties may commence litigation
to prevent the completion of the merger. There can be no
assurance that:
|
|
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|
|
the Company and UHS will be able to satisfy or comply with any
conditions imposed; or
|
|
|
|
litigation, if any, will be resolved favorably by the Company
and UHS.
|
The merger is also subject to review under state antitrust laws
and could be the subject of challenges by states or private
parties under the antitrust laws. The Attorneys General of three
states are investigating the merger in tandem with the FTC.
Though not a condition to the consummation of the merger, United
States federal and state laws and regulations may require that
the Company or UHS obtain approvals, file new licenses
and/or
permit applications with,
and/or
provide notice to, applicable governmental authorities in
connection with the merger.
See The Merger Agreement Efforts to Complete
the Merger for information on the obligations of the
parties under the merger agreement to obtain the regulatory
approvals required to consummate the merger.
Financing
of the Merger
UHS estimates that the total amount of funds necessary to
complete the proposed merger and the related transactions is
approximately $3.64 billion, which includes approximately
$1.98 billion to be paid to the Companys
stockholders, with the remaining funds to be used to refinance
certain existing indebtedness, and to pay customary fees and
expenses in connection with the proposed merger, the financing
arrangements and the related transactions.
The merger agreement does not contain any condition relating to
the receipt of financing by UHS. Funding of the debt financing
is subject to the satisfaction of the conditions set forth in
the commitment letter pursuant to which the financing will be
provided. The debt financing will provide the necessary
financing for the merger, including the payment of related
transaction costs, charges, fees and expenses. On May 16,
2010, UHS entered into a financing commitment letter with
JPMorgan, Deutsche Bank Securities Inc., J.P. Morgan
Securities Inc. and Deutsche Bank, pursuant to which JPMorgan
and Deutsche Bank have, taken together, committed to provide the
financing necessary to consummate the merger and to refinance
certain existing indebtedness. Since May 16, 2010, JPMorgan
and Deutsche Bank have assigned, and certain other financial
institutions approved by UHS have assumed, a portion of the
commitments originally provided by JPMorgan and Deutsche Bank.
The financing commitment letter provides for senior secured
credit facilities in an aggregate amount of $4.15 billion,
comprised of (i) a $500 million
tranche A term loan facility, (ii) a
$2.85 billion tranche B term loan facility
and (iii) an $800 million revolving credit facility.
The amount of the tranche B term loan facility
will be reduced by an amount equal to the gross cash proceeds
(if any) obtained by UHS prior to the closing of the merger from
the issuance and sale of senior unsecured notes.
36
Interests
of the Companys Directors and Executive Officers in the
Merger
In considering the recommendation of the board of directors, the
Companys stockholders should be aware that certain of the
Companys directors and executive officers have interests
in the transaction that are different from, or in addition to,
the interests of the Companys stockholders generally. The
special committee and our board of directors were aware of these
potential conflicts of interest and considered them, among other
matters, in reaching their decisions to approve the merger
agreement and to recommend that our stockholders vote in favor
of adopting the merger agreement.
The
Companys Equity Compensation Plans
Upon the consummation of the merger, all of our equity
compensation awards (including awards held by our executive
officers and directors) will be subject to the following
treatment:
|
|
|
|
|
all outstanding options to acquire Common Stock will become
fully vested and exercisable (to the extent not already vested
and exercisable) and will be cancelled and converted into the
right to receive a cash payment equal to the number of shares of
Common Stock underlying the option multiplied by the amount (if
any) by which $33.75 exceeds the applicable per share option
exercise price; and
|
|
|
|
all shares of restricted Common Stock will become fully vested
and transferable and cancelled and converted into the right to
receive $33.75 in cash.
|
See The Merger Agreement Treatment of Options
and Other Awards and The Merger
Agreement Employee Benefits for a more
complete discussion of the treatment of these plans and awards.
All of the preceding cash payments will be without interest and
subject to applicable withholding taxes.
In the second quarter of 2009, the compensation committee of the
Companys board of directors (the compensation
committee) retained Pearl Meyer & Partners
(PM&P) to review the compensation of the
Companys executive officers compared to companies in its
peer group. PM&P issued two reports in the third quarter of
2009 evaluating the compensation of Mr. Jacobs and the
Companys other executive officers, respectively. The
reports indicated that the amount of annual long-term equity
awards historically granted to the Companys executive
officers was generally low relative to its peer group. After
consideration of various factors, including these reports, the
compensation committee determined to grant the executive
officers equity awards at a more competitive level. On
December 18, 2009, the compensation committee adopted the
Amended 2009 Long-Term Equity Compensation Plan (the 2009
Equity Compensation Plan) and the 2010 Long-Term Equity
Compensation Plan (the 2010 Equity Compensation
Plan) for eligible employees, including the Companys
executive officers.
Based on the PM&P reports and a review of the equity
compensation programs of the Companys peer group, the
compensation committee decided to adopt the 2010 Equity
Compensation Plan to more closely align the Companys plan
with those of its peers. According to PM&P, the
Companys historical compensation strategy was unique in
that it required that financial performance goals for a fiscal
year be met in advance of equity awards being granted for such
year. By contrast, the vesting of equity awards granted by peer
companies may be subject to the achievement of performance
goals, but the number of awards that might be granted usually
are not conditioned upon the achievement of performance goals.
However, the Companys equity compensation plans
historically set financial performance goals to determine
whether and, if so, how many equity awards will be available for
grant to employees, including executive officers, for a
particular year. The compensation committee would then determine
the number and allocation of equity awards for a particular year
only after the end of the year based on the Companys
financial results relative to the performance goals for that
year. For 2010, the compensation committee transitioned to an
equity compensation plan in which the maximum equity awards
available for grant are set at the beginning of the year and
equity grants are made during the year for which the plan was
adopted, which methodology is more comparable to peer company
plans.
Pursuant to the 2009 Equity Compensation Plan, on
February 11, 2010, the compensation committee approved the
grant of a total of 458,000 shares of restricted Common
Stock to the Companys executive
37
officers, effective on February 26, 2010, which will vest
25% per year over four years. The equity awards granted pursuant
to the 2009 Equity Compensation Plan were based on the
Companys financial performance in 2009.
Pursuant to the 2010 Equity Compensation Plan, on
February 11, 2010, the compensation committee approved the
grant of a total of 230,000 shares of restricted Common
Stock to the Companys executive officers, effective on
February 26, 2010, which will vest 25% per year over four
years; provided, however, that all shares of restricted stock
will be forfeited if a certain financial performance goal is not
met in 2010. Also on February 11, 2010, pursuant to the
2010 Equity Compensation Plan, the compensation committee
approved the grant of options to purchase a total of
621,000 shares of Common Stock to the Companys
executive officers, effective on February 26, 2010, which
will vest and become exercisable in equal installments over four
years. The exercise price of the stock options is $21.00 per
share, which was the closing price of the Common Stock on the
NASDAQ on February 25, 2010. Consistent with prior years,
the exercise price of annual option grants was the closing price
of the Common Stock on the NASDAQ on the second trading day
after the issuance of the Companys fourth quarter earnings
release and the effective date of the grants was the first day
thereafter.
The table below sets forth, for each person who has been a
director or executive officer of the Company at any time since
January 1, 2009, the aggregate number of shares of Common
Stock subject to outstanding vested and unvested options as of
June 22, 2010, the aggregate number of shares of Common
Stock subject to outstanding unvested options that will become
fully vested in connection with the merger, the weighted average
exercise price per share and the value of such unvested options,
and the weighted average exercise price per share and value of
vested and unvested options (in all cases before applicable
withholding taxes). The information assumes that all such
options remain outstanding on the closing date of the merger.
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Aggregate
|
|
Weighted
|
|
Aggregate
|
|
Weighted
|
|
|
|
|
|
|
Number of
|
|
Average
|
|
Number of
|
|
Average
|
|
|
|
|
|
|
Shares
|
|
Exercise
|
|
Shares
|
|
Exercise
|
|
|
|
Value of
|
|
|
Subject to
|
|
Price of
|
|
Subject to
|
|
Price of
|
|
Value of
|
|
Vested and
|
|
|
Vested
|
|
Vested
|
|
Unvested
|
|
Unvested
|
|
Unvested
|
|
Unvested
|
Name
|
|
Options
|
|
Options
|
|
Options
|
|
Options
|
|
Options(1)
|
|
Options(2)
|
|
Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark P. Clein
|
|
|
22,000
|
|
|
$
|
33.90
|
|
|
|
2,000
|
|
|
$
|
35.61
|
|
|
$
|
|
|
|
$
|
34,080
|
|
David M. Dill
|
|
|
34,000
|
|
|
$
|
30.58
|
|
|
|
2,000
|
|
|
$
|
35.61
|
|
|
$
|
|
|
|
$
|
145,200
|
|
Richard D. Gore
|
|
|
36,000
|
|
|
$
|
26.51
|
|
|
|
2,000
|
|
|
$
|
35.61
|
|
|
$
|
|
|
|
$
|
298,130
|
|
Christopher Grant, Jr.
|
|
|
22,000
|
|
|
$
|
33.90
|
|
|
|
2,000
|
|
|
$
|
35.61
|
|
|
$
|
|
|
|
$
|
34,080
|
|
Joey A. Jacobs
|
|
|
1,362,931
|
|
|
$
|
20.34
|
|
|
|
385,000
|
|
|
$
|
22.70
|
|
|
$
|
4,369,750
|
|
|
$
|
22,997,095
|
|
William M. Petrie, M.D.
|
|
|
34,000
|
|
|
$
|
28.75
|
|
|
|
2,000
|
|
|
$
|
35.61
|
|
|
$
|
|
|
|
$
|
207,360
|
|
Edward K. Wissing
|
|
|
30,000
|
|
|
$
|
30.01
|
|
|
|
2,000
|
|
|
$
|
35.61
|
|
|
$
|
|
|
|
$
|
149,600
|
|
Executive Officers (who are not directors)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terrance R. Bridges(3)
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Ronald M. Fincher
|
|
|
128,500
|
|
|
$
|
31.79
|
|
|
|
270,000
|
|
|
$
|
27.30
|
|
|
$
|
1,786,188
|
|
|
$
|
2,172,735
|
|
Christopher L. Howard
|
|
|
132,499
|
|
|
$
|
30.24
|
|
|
|
124,334
|
|
|
$
|
23.30
|
|
|
$
|
1,373,963
|
|
|
$
|
2,062,375
|
|
Jack E. Polson
|
|
|
328,499
|
|
|
$
|
23.19
|
|
|
|
124,334
|
|
|
$
|
23.30
|
|
|
$
|
1,373,963
|
|
|
$
|
5,067,625
|
|
Brent Turner
|
|
|
232,699
|
|
|
$
|
28.08
|
|
|
|
124,334
|
|
|
$
|
23.30
|
|
|
$
|
1,373,963
|
|
|
$
|
2,916,487
|
|
|
|
|
(1)
|
|
Illustrates the economic value of all unvested options that will
become fully vested and cashed out in connection with the
merger. Calculated for each individual by multiplying the number
of shares underlying unvested options by the amount, if any, by
which $33.75 (the per share amount of merger consideration)
exceeds the actual exercise price per share of the unvested
options.
|
|
(2)
|
|
Illustrates the economic value of all options (whether vested or
unvested) to be cancelled and cashed out in connection with the
merger. Calculated for each individual by multiplying the
aggregate number of
|
38
|
|
|
|
|
shares subject to options by the amount, if any, by which $33.75
(the per share amount of merger consideration) exceeds the
actual exercise price per share of all such options.
|
|
(3)
|
|
Mr. Bridges resigned as the Companys Co-Chief
Operating Officer effective as of September 25, 2009.
|
The following table identifies, for each person who has been a
director or executive officer of the Company at any time since
January 1, 2009, the aggregate number of shares of
restricted stock as of June 22, 2010 and the value of such
restricted stock that will become fully vested and transferable
in connection with the merger. The information assumes that all
such shares of restricted stock remain outstanding on the
closing date of the merger.
|
|
|
|
|
|
|
|
|
|
|
Aggregate Shares of
|
|
Values of Shares of
|
Name
|
|
Restricted Stock
|
|
Restricted Stock(1)
|
|
Directors
|
|
|
|
|
|
|
|
|
Mark P. Clein
|
|
|
5,600
|
|
|
$
|
189,000
|
|
David M. Dill
|
|
|
5,600
|
|
|
$
|
189,000
|
|
Richard D. Gore
|
|
|
5,600
|
|
|
$
|
189,000
|
|
Christopher Grant, Jr.
|
|
|
5,600
|
|
|
$
|
189,000
|
|
Joey A. Jacobs
|
|
|
397,500
|
|
|
$
|
13,415,625
|
|
William M. Petrie, M.D.
|
|
|
5,600
|
|
|
$
|
189,000
|
|
Edward K. Wissing
|
|
|
5,600
|
|
|
$
|
189,000
|
|
Executive Officers (who are not directors)
|
|
|
|
|
|
|
|
|
Terrance R. Bridges(2)
|
|
|
|
|
|
$
|
|
|
Ronald M. Fincher
|
|
|
143,750
|
|
|
$
|
4,851,563
|
|
Christopher L. Howard
|
|
|
131,334
|
|
|
$
|
4,432,523
|
|
Jack E. Polson
|
|
|
133,334
|
|
|
$
|
4,500,023
|
|
Brent Turner
|
|
|
138,334
|
|
|
$
|
4,668,773
|
|
|
|
|
(1)
|
|
Illustrates the economic value of all shares of restricted stock
that will become fully vested, transferable and cashed out in
connection with the merger by multiplying (for each individual)
the aggregate number of shares of restricted stock by $33.75
(the per share amount of merger consideration).
|
|
(2)
|
|
Mr. Bridges resigned as the Companys Co-Chief
Operating Officer effective as of September 25, 2009.
|
Change
in Control Severance Agreements and Potential Severance
Payments
Each of our current executive officers (other than
Mr. Jacobs) is party to a change in control severance
agreement (CIC Agreement) with the Company. At the
end of March and the beginning of April 2010, the compensation
committee discussed the implementation of change in control
severance arrangements with certain of the Companys key
officers. Since competitors with behavioral health businesses
had shown interest in potentially acquiring the Company, the
compensation committee was concerned with retaining and
motivating certain members of the Companys senior
management, and determined it would be in the best interests of
the Company and its stockholders to enter into change in control
arrangements with these key officers. The compensation committee
retained PM&P to assist it in evaluating the terms of such
arrangements and met on April 5, 2010 to discuss the same,
including the fact that such arrangements, in the opinion of
PM&P, were consistent with, or more favorable to, the
Company than similar arrangements with senior executives at
comparable companies. Following discussions with the
Companys other independent directors, the compensation
committee approved such agreements for each of the
Companys executive officers (other than Mr. Jacobs)
and Steven T. Davidson and Kathy L. Bolmer.
The CIC Agreements provide for certain compensation and benefits
to be paid to the executive officers in the event of the
involuntary or constructive termination of such executive
officers employment within 12 months following a
change in control of the Company, other than as a result of such
executive officers death or disability. The compensation
and benefits payable under the CIC Agreements include a lump sum
payment equal to the sum of: (i) the earned but unpaid base
pay due to the executive officer; (ii) two times the
39
sum of the executive officers base pay plus incentive pay
in an amount equal to the higher of (A) the highest annual
amount of incentive pay paid to or earned by the executive
officer with respect to any of the three fiscal years prior to
the fiscal year in which the change in control occurs and
(B) 100% of the incentive pay amount that would be payable
to the executive officer, assuming that both the Company and the
executive officer satisfy 100% (but not in excess of 100%) of
the performance objectives specified in or pursuant to the
applicable agreement, policy, plan, program or arrangement and
communicated to the executive officer for the fiscal year in
which the change in control occurs; (iii) the executive
officers accrued but unused paid time off or sick pay and
unreimbursed business expenses; (iv) any other compensation
or benefits payable to the executive officer in accordance with
the terms of the Companys existing plans and programs; and
(v) a pro-rata portion of the incentive pay amount that
would be payable to the executive officer, assuming both the
Company and the executive officer satisfy 100% (but not in
excess of 100%) of the performance objectives specified in or
pursuant to the applicable agreement, policy, plan, program or
arrangement and communicated to the executive officer for the
fiscal year in which the separation date occurs. Additionally,
the executive officer will be entitled to (a) full vesting
of stock options and restricted stock or other equity-based
awards that have not otherwise become vested, (b) the
provision of certain health and welfare benefits for
24 months following the termination of employment and
(c) reimbursement of up to $25,000 for outplacement
counseling expenses and related benefits for 12 months
following the termination of employment.
The CIC Agreements provide that if the executive officer
receives payments or distributions that constitute
parachute payments within the meaning of
Section 280G of the Code, and the net after-tax amount of
the aggregate parachute payments is less than the net after-tax
amount if the aggregate parachute payments to be made to the
executive officer were three times the executive officers
base amount (as defined in Section 280G(b)(3)
of the Code) less $1.00, then the aggregate of the amounts
constituting the parachute payment will be reduced to an amount
that will equal three times the executive officers base
amount, less $1.00.
For purposes of the CIC Agreements, a constructive termination
is a termination of employment by the executive officer upon the
occurrence of certain events, including: (i) a material
adverse change in the nature or scope of the executive
officers responsibilities or duties; (ii) a reduction
in the executive officers base or incentive pay;
(iii) certain changes in the executive officers
principal location of work; or (iv) a change in business
circumstances which materially hinders the executive
officers performance or materially reduces his
responsibilities or duties.
For 2010, all of our executive officers participate in our
Executive Performance Incentive Plan (the Executive
Plan). Payments to executives pursuant to the Executive
Plan are designed to qualify as performance-based
compensation under Section 162(m) of the Code. The
Executive Plan provides that in the event the Company
experiences a change in control, the executives participating in
the plan will receive the maximum amount payable under an award
pursuant to the plan, whether or not the performance goals
specified in the award have been achieved. Therefore, the bonus
amounts for 2010 payable to our executive officers have been
determined in accordance with the Executive Plan.
Assuming that the merger is completed and the executive officers
are terminated on December 1, 2010, and that the executive
officers were entitled to full benefits available under their
respective CIC Agreements and the Executive Plan, the executive
officers would receive approximately the amounts set forth in
the table below. The table does not include (i) any earned
but unpaid base pay due to the executive officer; (ii) the
value of any accrued but unused paid time off or sick pay and
unreimbursed business expenses; (iii) the value of
continued medical benefits or outplacement counseling and
related benefits that could be received by the executive
officers; or (iv) the value of any equity-based awards.
|
|
|
|
|
|
|
Potential Estimated Cash
|
Name
|
|
Severance Payment
|
|
Ronald M. Fincher
|
|
$
|
2,603,596
|
|
Christopher L. Howard
|
|
$
|
2,225,295
|
|
Jack E. Polson
|
|
$
|
2,225,295
|
|
Brent Turner
|
|
$
|
2,225,295
|
|
40
Joey
A. Jacobs Employment Agreement
Concurrently with the compensation committees
consideration of the adoption of the CIC Agreements, the
compensation committee discussed amending the severance
provisions of Mr. Jacobs employment agreement. The
compensation committee considered that competitors with
behavioral health businesses had shown interest in potentially
acquiring the Company, and determined, after consulting
PM&P and reviewing similar arrangements with chief
executive officers of comparable companies, that it would be in
the best interests of the Company and its stockholders to amend
Mr. Jacobs employment agreement in April 2010.
Mr. Jacobs employment agreement provides that upon
Mr. Jacobs voluntary or involuntary separation from
service with the Company, other than as a result of his death or
disability, within 12 months following a change in control,
Mr. Jacobs will be entitled to a lump sum payment equal to
the sum of: (i) Mr. Jacobs earned but unpaid
base salary through the termination date; (ii) three times
the sum of Mr. Jacobs base salary plus an amount
equal to the higher of (A) the highest annual amount of
bonus compensation paid to or earned by Mr. Jacobs with
respect to the three fiscal years prior to the fiscal year in
which the change in control occurs, and (B) 100% of the
bonus compensation amount that would be payable to
Mr. Jacobs, assuming that both the Company and
Mr. Jacobs satisfy 100% (but not in excess of 100%) of the
performance objectives specified in or pursuant to the
applicable agreement, policy, plan, program or arrangement and
communicated to Mr. Jacobs for the fiscal year in which the
change in control occurs; (iii) Mr. Jacobs
accrued but unused paid time off or sick pay and unreimbursed
business expenses; (iv) any other compensation or benefits
payable to Mr. Jacobs in accordance with any plans or
programs of the Company; and (v) a pro-rata portion of the
bonus compensation amount that would be payable to
Mr. Jacobs, assuming both the Company and Mr. Jacobs
satisfy 100% (but not in excess of 100%) of the performance
objectives specified in or pursuant to the applicable agreement,
policy, plan, program or arrangement and communicated to
Mr. Jacobs for the fiscal year in which the termination
date occurs. Additionally, Mr. Jacobs will be entitled to
(a) full vesting of stock options and restricted stock or
other equity-based awards that have not otherwise become vested,
(b) the provision of certain health and welfare benefits
for 36 months following the termination of employment and
(c) reimbursement of up to $25,000 for outplacement
counseling expenses and related benefits for 12 months
following the termination of employment.
Mr. Jacobs participates in the Executive Plan. Therefore,
the bonus amount for 2010 payable to him has been determined in
accordance with the Executive Plan.
Pursuant to the employment agreement and the Executive Plan,
assuming that the merger is completed and Mr. Jacobs
employment terminates on December 1, 2010, he would be
entitled to receive a potential estimated cash severance payment
of $14,164,161. This amount does not include (i) any earned
but unpaid base pay due to Mr. Jacobs; (ii) the value
of any accrued but unused paid time off or sick pay and
unreimbursed business expenses; (iii) the value of
continued medical benefits or outplacement counseling and
related benefits that could be received by Mr. Jacobs; or
(iv) the value of any equity-based awards.
Compensation
to the Independent Directors
Our board of directors has authorized the payment of $150,000 to
the chairman of the special committee and $100,000 to each of
the other members of the special committee, as compensation for
their service on the special committee. In addition, the board
of directors has authorized a payment to Mark P. Clein, an
independent director, in an amount equal to a percentage of
$100,000 which is proportionate to the number of meetings of the
special committee that he attended compared to the total number
of meetings of the special committee held as compensation for
his service to the special committee. The board has also
authorized the reimbursement to each of these independent
directors of
out-of-pocket
expenses incurred in connection with his service on the special
committee. The compensation and reimbursement to be paid to
these independent directors are not contingent upon the
completion of any transaction or any favorable recommendation of
the special committee.
Indemnification
and Insurance
For a period of six years following the effective time of the
merger, UHS and the surviving corporation have agreed to
indemnify and hold harmless, to the fullest extent permitted by
law, each of the present and former
41
directors and officers of the Company and its subsidiaries
against any and all costs and expenses (including
attorneys fees), judgments, fines, losses, claims,
damages, liabilities and settlement amounts paid in connection
with any claim, action, suit, proceeding or investigation
(whether arising before or after the effective time of the
merger), whether civil, criminal, administrative or
investigative, arising out of or pertaining to any action or
omission in their capacity as an officer, director, employee,
fiduciary or agent, whether occurring on or before the effective
time of the merger. Also, the surviving corporation has agreed
to honor and fulfill in all respects the obligations of the
Company and its subsidiaries under all indemnification
agreements between the Company or any of its subsidiaries and
any of its or their respective present or former directors and
officers.
The merger agreement requires that the surviving corporation
either (i) cause to be obtained at the effective time of
the merger tail insurance policies with a claims
period of at least six years from the effective time of the
merger with respect to directors and officers
liability insurance in amount and scope at least as favorable as
the Companys existing policies for claims arising from
facts or events that occurred on or prior to the effective time
of the merger, or (ii) maintain in effect for six years
from the effective time of the merger, if available, the current
directors and officers liability insurance policies
maintained by the Company (provided that the surviving
corporation may substitute policies of at least the same
coverage containing terms and conditions that are not less
favorable than the current policies) with respect to matters
occurring prior to the effective time of the merger. If the
annual premiums of insurance coverage exceed 300% of the
Companys current annual premiums, UHS or the surviving
corporation must obtain as much coverage as is possible under
substantially similar policies for a cost not exceeding 300% of
the current annual premiums paid by the Company.
Litigation
Related to the Merger
Between May 17, 2010 and June 2, 2010, seven putative
class action complaints were filed on behalf of alleged public
stockholders of the Company. Two of the lawsuits,
Carpenters
Pension Fund of West Virginia v. Psychiatric Solutions,
Inc., et al.
, Case No. 38359, and
Pedric v.
Psychiatric Solutions, Inc., et al.
, Case No. 38391,
were filed in the Chancery Court for Williamson County,
Tennessee. One of the lawsuits,
Smith v. Psychiatric
Solutions, Inc., et al.
, Case
No. 10-862-II,
was filed in the Chancery Court for Davidson County, Tennessee.
Another three lawsuits,
Oklahoma Police Pension and
Retirement System v. Jacobs, et al.
, Case No. CA
5514,
City of Miami Police Relief and Pension Fund v.
Jacobs, et al.
, Case No. 5515, and
Plumbers & Pipefitters, Local 152 Pension
Fund v. Psychiatric Solutions, Inc., et al.
, Case
No. 5532, were filed in the Court of Chancery for the State
of Delaware. A seventh lawsuit,
Rosinek v. Psychiatric
Solutions, Inc., et al.
, Case
No. 3:10-cv-00534,
was filed in the United States District Court for the Middle
District of Tennessee. The defendants generally include the
Company, members of the Companys board of directors and,
in certain of the cases, officers of the Company. UHS
and/or
its
affiliates are named as defendants in some of the lawsuits. The
lawsuits allege, among other things, that the Companys
directors breached their fiduciary duties in connection with the
proposed merger by failing to maximize stockholder value. The
lawsuits also allege that the directors have put their personal
interests ahead of those of the stockholders, including by
approving the merger to extinguish any personal liability they
could suffer from previously asserted derivative claims related
to, among other things, violations of fiduciary duties and
federal securities laws and also by negotiating a merger
agreement that includes broad director and officer insurance and
indemnification provisions protecting them against civil and
criminal claims for six years from the date of the merger
agreement. Certain of the lawsuits allege that various
individual defendants will receive improper change of control
payments and merger consideration in connection with equity
awards that plaintiffs contend were improper. Certain of the
lawsuits also allege that the Company and UHS aided and abetted
the various breaches of fiduciary duty. Certain of the lawsuits
also allege that various individual defendants caused the
Company to issue a proxy statement containing materially false
and misleading statements and omissions in connection with the
Companys 2010 annual stockholder meeting. Among other
things, the lawsuits seek to enjoin the Company and our
directors from consummating the merger and also seek rescission
of the allegedly improper equity awards. The Company believes
that the claims asserted in the lawsuits are without merit and
intends to defend the suits vigorously. The three Delaware cases
have been consolidated and a hearing has been set for
August 5, 2010 and the Davidson County case has been
transferred to Williamson County. The defendants have moved to
stay the Tennessee state and federal court cases in favor of the
Delaware cases.
42
MATERIAL
U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
TO OUR STOCKHOLDERS
The following summary is a general discussion of certain
material U.S. federal income tax consequences of the merger
to U.S. Holders and
Non-U.S. Holders,
each as defined below, whose shares of Common Stock are
converted into the right to receive cash in the merger. This
summary generally is limited to holders who hold their shares of
Common Stock as capital assets (generally, property held for
investment) and does not deal with special tax situations
including, but not limited to, those that may apply to
particular holders such as tax-exempt organizations, holders
subject to the U.S. federal alternative minimum tax,
brokers, dealers in securities or currencies, banks or other
financial institutions, hybrid entities, real estate investment
trusts, traders in securities that elect to use a
mark-to-market
method of accounting for their securities holdings, insurance
companies, regulated investment companies, controlled foreign
corporations, passive foreign investment companies, individual
retirement and other tax-deferred accounts, partnerships or
other pass-through entities for U.S. federal income tax
purposes or investors in such entities, U.S. Holders whose
functional currency is not the U.S. dollar, and
persons who hold their shares of Common Stock in connection with
a hedging, straddle, conversion or other risk reduction
transaction.
This discussion does not address any tax consequences to
stockholders who acquired their shares of Common Stock through
the exercise of employee stock options or other compensation
arrangements. Such stockholders should consult their own tax
advisor for a full understanding of the tax consequences of the
receipt of cash in connection with the cancellation of options
to purchase shares of Common Stock or shares of restricted
Common Stock, including the transactions described in this proxy
statement relating to other equity compensation and benefit
plans.
If an entity or arrangement treated as a partnership for
U.S. federal income tax purposes (a Tax
Partnership) is a beneficial owner of shares of Common
Stock, the tax treatment of a partner in the Tax Partnership
will generally depend upon the status of the partner and the
activities of the Tax Partnership. A beneficial owner that is a
Tax Partnership and partners in such a Tax Partnership should
consult their tax advisors about the U.S. federal income
tax consequences of the merger.
This discussion does not address any alternative minimum tax
consequences, U.S. federal estate or gift tax laws, or the
tax laws of any state, local or foreign government that may be
applicable to stockholders.
The U.S. federal income tax considerations set forth below
are based upon the Code, Treasury regulations promulgated
thereunder, court decisions, and rulings and pronouncements of
the Internal Revenue Service (the IRS), all as in
effect on the date hereof and all of which are subject to
change, possibly on a retroactive basis. No ruling has been or
is expected to be sought from the IRS with respect to the
statements made and the conclusions reached in this discussion,
and the IRS would not be precluded from taking contrary
positions. There can be no assurance that the IRS will not take
a different position concerning the U.S. federal income tax
consequences of the merger or that any such position would not
be sustained.
U.S.
Holders
As used herein, the term U.S. Holder means a
beneficial owner of shares of Common Stock that is, for
U.S. federal income tax purposes:
|
|
|
|
|
an individual who is a citizen or resident of the United States;
|
|
|
|
a corporation, or other entity taxable as a corporation for
U.S. federal income tax purposes, that is created or
organized in or under the laws of the United States, any state
thereof or the District of Columbia;
|
|
|
|
an estate, the income of which is subject to U.S. federal
income taxation regardless of its source; or
|
|
|
|
a trust, if (i) a court within the United States is able to
exercise primary jurisdiction over its administration and one or
more U.S. persons have the authority to control all of its
substantial decisions or (ii) it has a valid election in
effect under applicable Treasury regulations to be treated as a
U.S. person.
|
43
Exchange
of Shares of Common Stock for Cash in the Merger
The exchange of shares of Common Stock for cash in the merger
will be a taxable transaction to U.S. Holders for
U.S. federal income tax purposes. In general, a
U.S. Holder whose shares of Common Stock are converted into
the right to receive cash in the merger will recognize capital
gain or loss for U.S. federal income tax purposes equal to
the difference, if any, between the amount of cash received with
respect to such shares (determined before the deduction of any
applicable withholding taxes) and the U.S. Holders
adjusted tax basis in such shares. Gain or loss will be
determined separately for each block of shares (i.e., shares
acquired at the same cost in a single transaction) of Common
Stock held by a U.S. Holder.
In general, capital gain or loss realized will be long-term
capital gain or loss if the U.S. Holder has held its shares
of Common Stock for more than one year at the effective time of
the merger. Non-corporate U.S. Holders may be subject to a
lower U.S. federal income tax rate on their net long-term
capital gains than the rate that is applicable to ordinary
income. Short-term capital gains are taxed at ordinary income
rates. The deductibility of capital losses is subject to
limitations.
Backup
Withholding and Information Reporting
A U.S. Holder generally will be subject to backup
withholding (currently at the rate of 28%) on cash payments
received in the merger unless the U.S. Holder provides the
paying agent with such U.S. Holders correct taxpayer
identification number (TIN) and certifies, under
penalties of perjury, that the U.S. Holder is a United
States person as defined in the Code, the TIN is correct and the
U.S. Holder either (a) is exempt from backup
withholding, (b) has not been informed by the IRS that
backup withholding is required due to underreporting of interest
or dividends or (c) has been informed by the IRS that
backup withholding is no longer required. Each U.S. Holder
should complete and sign, under penalty of perjury, the
Substitute
Form W-9
included as part of the letter of transmittal and return it to
the paying agent in order to provide the information and
certification necessary to avoid backup withholding, unless an
exemption applies and is established in a manner satisfactory to
the paying agent. U.S. Holders should consult their tax
advisors as to their qualification for exemption from backup
withholding and the procedure for obtaining such exemption.
Backup withholding is not an additional tax. Any amounts
withheld from cash payments to a U.S. Holder pursuant to
the merger under the backup withholding rules will be allowable
as a refund or a credit against such holders
U.S. federal income tax liability, if any, provided the
required information is timely furnished to the IRS.
Cash payments made pursuant to the merger also will be subject
to information reporting unless an exemption applies.
Non-U.S.
Holders
As used herein, a
Non-U.S. Holder
means a beneficial owner of shares of Common Stock that is
neither a U.S. Holder, a Tax Partnership, nor a former
citizen or long-term resident of the United States.
Non-U.S. Holders
are subject to special U.S. federal income tax
considerations, some of which are discussed below.
Exchange
of Shares of Common Stock for Cash in the Merger
Any gain realized on the receipt of cash in the merger by a
Non-U.S. Holder
generally will not be subject to U.S. federal income tax
unless:
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the
Non-U.S. Holder
is an individual who is present in the United States for
183 days or more in the taxable year of that disposition,
and certain other conditions are met, in which case such
Non-U.S. Holder
generally will be subject to a tax equal to 30% (or, if
applicable, a lower treaty rate) of the
Non-U.S. Holders
net gain realized in the merger, which may be offset by
U.S. source capital losses; or
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the gain is effectively connected with the conduct of a trade or
business of the
Non-U.S. Holder
in the United States (and, if required by an applicable income
tax treaty, is attributable to a United States permanent
establishment of the
Non-U.S. Holder),
in which case such
Non-U.S. Holder
will be taxed as described below.
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If a
Non-U.S. Holder
is engaged in a trade or business in the United States and gain
from the disposition of the shares of Common Stock in the merger
is effectively connected with the conduct of that trade or
business (and, if required by an applicable income tax treaty,
is attributable to a United States permanent establishment of
the
Non-U.S. Holder),
then such
Non-U.S. Holder
will be subject to U.S. federal income tax on that gain on
a net income basis in the same manner as if such
Non-U.S. Holder
were a U.S. Holder. In addition, if such a
Non-U.S. Holder
is a corporation, it may be subject to a branch profits tax
equal to 30% (or, if applicable, a lower treaty rate) of the
effectively connected earnings and profits attributable to such
gain, subject to adjustments.
In addition, any gain to a
Non-U.S. Holder
upon the exchange of shares of Common Stock for cash in the
merger may be subject to U.S. federal income tax if such
stock constitutes a U.S. real property interest by reason
of the Companys status as a U.S. real property
holding corporation (a USRPHC) during the relevant
statutory period. We believe that we currently are not a USRPHC.
In the event we were a USRPHC during the relevant statutory
period, as long as the Common Stock is regularly traded on an
established securities market, such stock will be treated as a
U.S. real property interest only with respect to a
Non-U.S. Holder
that has actually or constructively held more than 5% of the
outstanding Common Stock.
Each
Non-U.S. Holder
should consult with its own tax advisors regarding whether it
will be subject to U.S. federal income tax as a result of
the merger and whether any applicable income tax treaty may
provide for rules different from those set forth above.
Backup
Withholding and Information Reporting
Backup withholding of tax (currently at the rate of 28%) may
apply to cash payments made to a non-corporate
Non-U.S. Holder
in the merger, unless the holder or other payee certifies under
penalty of perjury that it is a
Non-U.S. Holder
(and the payor does not have actual knowledge or reason to know
that the holder is a United States person as defined in the
Code), in the manner described in the letter of transmittal and
otherwise complies with the backup withholding rules or
otherwise establishes an exemption in a manner satisfactory to
the paying agent.
Backup withholding is not an additional tax. Any amounts
withheld from cash payments to a
Non-U.S. Holder
pursuant to the merger under the backup withholding rules will
be allowable as a refund or a credit against such holders
U.S. federal income tax liability, if any, provided the
required information is timely furnished to the IRS.
Cash payments made pursuant to the merger also will be subject
to information reporting, unless an exemption applies.
The U.S. federal income tax consequences set forth above
are not intended to constitute a complete description of all tax
consequences relating to the merger. Because individual
circumstances may differ, each stockholder should consult the
stockholders tax advisor regarding the applicability of
the rules discussed above to the stockholder and the particular
tax effects to the stockholder of the merger in light of such
stockholders particular circumstances, the application of
state, local and foreign tax laws, and, if applicable, the tax
consequences of the receipt of cash in connection with the
cancellation of shares of restricted Commons Stock or options to
purchase shares of Common Stock, including the transactions
described in this proxy statement relating to our other equity
compensation and benefit plans.
45
THE
MERGER AGREEMENT
(PROPOSAL NO. 1)
This section of the proxy statement describes the material
provisions of the merger agreement but does not purport to
describe all of the terms of the merger agreement. The following
summary is qualified in its entirety by reference to the
complete text of the merger agreement, which is attached as
Annex A to this proxy statement and incorporated into this
proxy statement by reference. We urge you to carefully read the
full text of the merger agreement because it is the legal
document that governs the merger. It is not intended to provide
you with any other factual information about us. Such
information can be found elsewhere in this proxy statement and
in the public filings we make with the SEC, as described in the
section entitled Where You Can Find More Information
below.
The
Merger
The merger agreement provides for the merger of Merger Sub with
and into the Company upon the terms, and subject to the
conditions, of the merger agreement. The merger will be
effective at the time the certificate of merger is filed with
the Secretary of State of the State of Delaware (or at a later
time, if agreed upon by the parties and specified in the
certificate of merger). We expect to complete the merger as
promptly as practicable following the satisfaction or waiver of
all conditions to the obligations of the respective parties to
the merger agreement to complete the merger.
As the surviving corporation, the Company will become a
wholly-owned subsidiary of UHS at the effective time of the
merger. Upon consummation of the merger, the directors of Merger
Sub will be the initial directors of the surviving corporation,
and the officers of the Company will be the initial officers of
the surviving corporation. All directors and officers of the
surviving corporation will hold their positions until their
successors are duly elected or appointed and qualified or until
the earlier of their death, resignation or removal.
We or UHS may terminate the merger agreement prior to the
consummation of the merger in some circumstances, whether before
or after the approval of the merger agreement by our
stockholders. Additional details regarding the termination of
the merger agreement appear in Termination of
the Merger Agreement.
Merger
Consideration
Each share of Common Stock issued and outstanding immediately
before the merger will be cancelled and converted into the right
to receive $33.75 in cash, without interest and less any
applicable withholding taxes, other than:
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shares held by the Company in treasury or owned by UHS or Merger
Sub, which will be cancelled; and
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shares held by stockholders who have properly demanded and
perfected their appraisal rights under Delaware law.
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After the merger is effective, each holder of any shares of
Common Stock (other than shares for which appraisal rights have
been properly demanded and perfected under Delaware law) will no
longer have any rights with respect to the shares, except for
the right to receive the merger consideration. See
Appraisal Rights.
Treatment
of Options and Other Awards
Upon the consummation of the merger, each outstanding option to
acquire Common Stock under the Companys equity incentive
plans will become fully vested and exercisable (to the extent
not already vested and exercisable) and will be cancelled and
converted into the right to receive a cash payment equal to the
number of shares of Common Stock underlying the option
multiplied by the amount (if any) by which $33.75 exceeds the
applicable option exercise price, without interest and less any
applicable withholding taxes. Additionally, each outstanding
share of restricted Common Stock will, upon the consummation of
the merger,
46
become fully vested and transferable and be cancelled and
converted into the right to receive $33.75 in cash, without
interest and less any applicable withholding taxes.
The effect of the merger upon our stock purchase and certain
other employee benefit plans is described below under
Employee Benefits.
Payment
for the Shares
Before the merger, UHS will designate a paying agent reasonably
satisfactory to us to make payment of the merger consideration
as described above. At the effective time of the merger, UHS
will deposit, or cause the surviving corporation to deposit,
with the paying agent, for the benefit of the stockholders, cash
in an amount sufficient to pay the aggregate merger
consideration required to be paid pursuant to the merger
agreement.
At the effective time of the merger, we will close the
Companys stock transfer books, and there will be no
further registration of transfers of shares of Common Stock that
were outstanding immediately prior to the effective time of the
merger on the records of the Company.
As promptly as practicable after the consummation of the merger,
UHS will cause to be mailed to each stockholder of record at the
effective time of the merger a letter of transmittal and
instructions advising how to surrender stock certificates or
non-certificated shares represented by book-entry in exchange
for the merger consideration. The paying agent will pay each
stockholder of record at the effective time of the merger its
merger consideration after (1) in the case of certificated
shares, such stockholder surrenders its stock certificates to
the paying agent for cancellation, together with a duly
completed and validly executed letter of transmittal, or
(2) in the case of non-certificated shares, the paying
agent receives an agents message, together
with any other required documents. Interest will not be paid or
accrue in respect of the merger consideration. The paying agent,
UHS or the surviving corporation will reduce the amount of any
merger consideration paid to you by any applicable withholding
taxes. YOU SHOULD NOT FORWARD YOUR STOCK CERTIFICATES TO THE
PAYING AGENT WITHOUT A LETTER OF TRANSMITTAL, AND YOU SHOULD NOT
RETURN YOUR STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
If any cash deposited with the paying agent is not claimed
within 12 months following the effective time of the
merger, such cash will be returned to the surviving corporation
upon demand. Any holders of Common Stock that have not complied
with the exchange procedure by that time must look only to UHS
or the surviving corporation for, and UHS and the surviving
corporation will remain liable for, payment of their claim for
the merger consideration. Any unclaimed amounts remaining
immediately prior to when such amounts would escheat to or
become property of any governmental authority will, to the
extent permitted by applicable law, become the property of UHS
free and clear of any prior claims or interest of any person
previously entitled thereto.
If the paying agent is to pay some or all of the merger
consideration to a person other than the person in whose name
the certificated or non-certificated shares are registered, the
person requesting payment must have all documents required to
evidence the transfer of shares and, with respect to
certificated shares, stock certificates properly endorsed or
otherwise in proper form for transfer, and the person requesting
payment must pay any fiduciary or surety bonds or any transfer
or other taxes payable by reason of the transfer or establish to
UHS reasonable satisfaction that the taxes have been paid
or are not required to be paid.
The instructions to the letter of transmittal will tell you what
to do if you have lost your stock certificate, or if it has been
stolen or destroyed. You will have to provide an affidavit to
that fact and, if required by the surviving corporation, post a
bond in form and substance and with surety reasonably
satisfactory to the surviving corporation as indemnity against
any claim that may be made against it in respect of the
certificate.
Representations
and Warranties
The merger agreement contains representations and warranties
made by us to UHS and Merger Sub and representations and
warranties made by UHS and Merger Sub to us. The representations
and warranties contained in the merger agreement were made
solely for purposes of the merger agreement and as of specified
47
dates, were solely for the benefit of the parties to the merger
agreement and may be subject to important qualifications and
limitations agreed by the parties in connection with negotiating
its terms. The representations and warranties may have been made
for purposes of allocating contractual risk between the parties
to the merger agreement instead of establishing these matters as
facts and may be subject to standards of materiality or material
adverse effect applicable to the contracting parties that differ
from those applicable to investors. You should not rely on the
representations, warranties and covenants or any descriptions
thereof as characterizations of the actual state of facts or
condition of the Company, UHS or Merger Sub or any of their
respective subsidiaries or affiliates. In addition, the
representations and warranties contained in the merger agreement
may be qualified by information in confidential disclosure
schedules provided by the Company in connection with the signing
of the merger agreement and such information may have been
disclosed for purposes of allocating contractual risk between
the parties to the agreement instead of establishing these
matters as facts. These confidential disclosure schedules
contain information that modifies, qualifies and creates
exceptions to the Companys representations and warranties
set forth in the merger agreement. Moreover, information
concerning the subject matter of the representations and
warranties may change after the date of the merger agreement,
which subsequent information may or may not be fully reflected
in the Companys or UHS public disclosures.
In the merger agreement, the Company, UHS and Merger Sub each
made representations and warranties relating to, among other
things:
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corporate organization and existence;
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corporate power and authority to enter into and perform its
respective obligations under, and enforceability of, the merger
agreement;
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required regulatory filings and consents and approvals of
governmental entities;
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the absence of litigation;
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the absence of conflicts with or defaults under organizational
documents, other contracts and applicable laws and judgments;
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finders or brokers fees; and
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information supplied for inclusion in this proxy statement.
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In the merger agreement, UHS also made representations and
warranties relating to the availability of the funds necessary
to perform its obligations under the merger agreement.
The Company also made representations and warranties relating
to, among other things:
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capital structure;
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compliance with applicable laws;
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possession of licenses and permits;
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documents filed with the SEC;
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accuracy of financial statements;
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undisclosed liabilities;
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absence of certain changes or events since December 31,
2009;
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compliance with the Employee Retirement Income Security Act of
1974, as amended, and other employee benefit matters;
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labor relations and employment-related matters;
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real property interests;
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tax matters;
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environmental matters;
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material contracts;
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insurance; and
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approval by our board of directors of the merger.
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Many of our representations and warranties are qualified by a
material adverse effect standard. For purposes of the merger
agreement, material adverse effect for the Company
is defined to mean (i) any event, circumstance, state of
facts, change or effect that is materially adverse to the
business, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole, or (ii) any
event, circumstance, state of facts, change or effect that would
prevent or materially delay the consummation of the merger or
otherwise prevent us from performing the Companys
obligations under the merger agreement; provided, however, that
in no event will any of the following, alone or in combination,
be deemed to constitute, nor will any of the following be taken
into account in determining whether there has been or would
reasonably be expected to be, a material adverse effect (except,
in the case of clauses (A)(1), (A)(2) or (A)(4) below, to the
extent any of the matters referred to therein has had or would
reasonably be expected to have a disproportionate adverse effect
on the Company and its subsidiaries, taken as a whole, as
compared to other for-profit and comparable or similar companies
operating in the industries in which the Company and its
subsidiaries operate, after taking into account the
Companys size relative to such other for-profit
companies): (A) any event, circumstance, state of facts,
change or effect resulting from or relating to (1) a change
in general economic, political or financial market conditions,
including interest or exchange rates, (2) a change
generally affecting the industries in which the Company and its
subsidiaries operate (including seasonal fluctuations) or
general economic conditions that generally affect the industries
in which the Company and its subsidiaries conduct business,
(3) any change in accounting requirements or principles
required by generally accepted accounting principles (or any
interpretations thereof) or required by any change in applicable
laws (or any interpretations thereof), (4) any adoption,
implementation, promulgation, repeal, modification,
reinterpretation or proposal of any law after the date of the
merger agreement, (5) any legal action, investigation,
review or examination undertaken by a governmental authority, or
any sanction, fine, operating restriction or other similar
penalty arising as a result thereof, with respect to any health
care business or health care facility the Company and its
subsidiaries operate, that is currently pending or arises after
the date of the merger agreement, in each case to the extent
such regulatory condition is consistent in nature, scope and
impact on the Company and its subsidiaries, taken as a whole,
with regulatory conditions arising and fully resolved from time
to time in the conduct of the business of the Company and its
subsidiaries on or before December 31, 2009, (6) any
acts of terrorism or war or any weather related event, fire or
natural disaster or any escalation thereof, (7) the
announcement of the execution of the merger agreement or the
pendency or consummation of the merger and the other
transactions contemplated by the merger agreement, including any
legal actions, challenges or investigations to the extent
relating to the merger agreement or the transactions
contemplated thereby made or brought by any of the current or
former stockholders of the Company (on their own behalf or on
behalf of the Company), (8) the identity of UHS or any of
its affiliates as the acquiror of the Company or any facts or
circumstances concerning UHS or any of its affiliates, or
(9) compliance with the terms of, the taking of any action
required or the failure to take any action prohibited by, the
merger agreement or the taking of any action consented to or
requested by UHS; or (B) any failure, in and of itself, to
meet internal or published projections, forecasts, performance
measures, operating statistics or revenue or earnings
predictions for any period or a decline in the price or trading
volume of the Common Stock (provided that, except as otherwise
identified in the definition of material adverse
effect, the underlying causes of such failure or decline
may be taken into account in determining whether there is a
material adverse effect on the Company).
Conduct
of Business Pending the Merger
We have agreed in the merger agreement that, subject to certain
exceptions, until the consummation of the merger, we will
conduct our business in the ordinary course of business, and we
will use our reasonable
49
best efforts to preserve substantially intact our business
organization and our current relationships with any persons with
which we have material business relations.
We also have agreed that, subject to certain exceptions, until
the consummation of the merger, except as expressly contemplated
or permitted by the merger agreement or consented to in writing
by UHS, we will not:
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amend or otherwise change organizational or governing documents,
or authorize or adopt (or publicly propose) a plan of complete
or partial liquidation or dissolution;
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(i) issue, grant, sell, dispose of, deliver, encumber, or
authorize any such issuance, grant, sale, disposition, delivery
or encumbrance of, any shares of any class of capital stock, or
any options, warrants, convertible securities or other rights of
any kind to acquire any shares of such capital stock, or any
other ownership interest, of the Company or any of its
subsidiaries (except for the issuance of shares issuable
pursuant to employee stock options outstanding on the date of
the merger agreement and in accordance with their terms) or
(ii) sell, dispose of, transfer, abandon, lease, license or
otherwise encumber, or authorize any such sale, disposition,
transfer, abandonment, lease, license or encumbrance of, any
properties, rights or assets that are material to the Company
and its subsidiaries, taken as a whole;
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declare, set aside, make or pay any dividend or other
distribution with respect to any capital stock other than
dividends or other distributions to the Company or any of its
direct or indirect wholly owned subsidiaries by any direct or
indirect wholly owned subsidiary of the Company;
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reclassify, combine, split, subdivide or redeem, or purchase or
otherwise acquire, directly or indirectly, any of our capital
stock or that of our subsidiaries (or any rights, warrants or
options to acquire any such capital stock);
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(i) acquire (including by purchase, merger, consolidation
or acquisition of stock or assets or any other business
combination) any corporation, partnership or other business
organization (or any division or business thereof);
(ii) except among the Company and any of our wholly owned
subsidiaries and except for borrowings under existing credit
facilities in the ordinary course of business, incur any
indebtedness for borrowed money, issue any debt securities or
calls, options, warrants or other rights to acquire debt
securities or assume, guarantee or endorse, or otherwise become
responsible for, the obligations of any person;
(iii) except with respect to the Company or any of its
wholly owned subsidiaries and as required in accordance with its
terms, redeem, purchase, prepay, defease or cancel any
indebtedness for borrowed money; (iv) except with respect
to the Company or any of its wholly owned subsidiaries, make any
loans, advances, investments or capital contributions in any
material amount in or to any third party; (v) enter into,
terminate, amend or fail to renew any contract material to the
Company and its subsidiaries, or waive, release or assign any
material rights or claims under any such material contract; or
(vi) authorize or make any commitment with respect to
capital expenditures that, individually or taken together,
exceed by 10% the aggregate amount of the annual capital
expenditures budget of the Company and its subsidiaries;
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(i) increase the compensation payable or to become payable
or the benefits provided to the Companys current or former
directors, officers or employees, except with respect to
officers or employees below the level of facility executive
officer or with respect to other officers or employees whose
annual compensation after such increase does not exceed
$100,000, in each case in the ordinary course of business
consistent with past practice; (ii) grant any retention,
severance, change in control or termination pay to, or enter
into any employment, bonus, change of control or severance
agreement with, any current or former director, officer or other
employee of the Company or any of its subsidiaries;
(iii) establish, adopt, enter into, terminate or amend any
employee benefit plan, or establish, adopt or enter into any
plan, agreement, program, policy, trust, fund or other
arrangement that would be an employee benefit plan or a
collective bargaining agreement if it were in existence as of
the date of the merger agreement, for the benefit of any
director, officer or employee except as required by law;
(iv) loan or advance any money or other property to any
current or former director, officer or employee of the Company
or any of its subsidiaries; or (v) take any action to
accelerate the time of
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vesting or payment of (or fund or otherwise secure) any
compensation or benefits under any employee benefit plan except,
in the case of the matters described in clauses (ii) and
(iii), with respect to newly hired employees and promoted
employees who are not directors or executive officers (and who
will not be directors or executive officers after such
promotion), plans, agreements, benefits and compensation
arrangements (including grants under the Companys equity
incentive plans) in the ordinary course of business consistent
with past practice;
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other than in the ordinary course of business or except as
required by applicable law, make, change or rescind any material
tax election, file any amended material tax return, enter into
any closing agreement relating to taxes, waive or extend the
statute of limitations in respect of material taxes (other than
pursuant to extensions of time to file tax returns obtained in
the ordinary course of business) or settle or compromise any
material income tax liability or other tax liability in excess
of $1.0 million in the aggregate;
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fail to maintain in full force and effect the existing insurance
policies (or alternative policies with comparable terms and
conditions) covering the Company and its subsidiaries and its
and their respective properties, assets and businesses;
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pay, discharge or settle (x) any legal action, other than
payments, discharges and settlements involving not more than
$1.0 million in the aggregate (net of insurance proceeds)
and that do not require any actions or impose any material
restrictions on the business or operations of the Company and
its subsidiaries, or (y) any legal action involving any
stockholder or group of stockholders;
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make any change in financial accounting methods, principles or
practices materially affecting the reported consolidated assets,
liabilities or results of operations of the Company, except as
required by generally accepted accounting principles or
applicable law;
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(i) effect or permit a plant closing or
mass layoff as those terms are defined in the
Workers Adjustment and Retraining Notification Act without
complying with the notice requirements and all other provisions
of such act or (ii) except as required by law, enter into
or modify or amend in any material respect or terminate any
collective bargaining agreement with any labor union other than
pursuant to customary negotiations in the ordinary course of
business; or
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announce an intention, enter into any formal or informal
agreement or otherwise make a commitment, to do any of the
foregoing.
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Restrictions
on Solicitations of Other Offers
Pursuant to the merger agreement, we have agreed not to:
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solicit, initiate or knowingly encourage any inquiries or the
implementation or submission of any acquisition proposal; or
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participate in discussions or negotiations regarding, or furnish
to any person any non-public information in connection with, any
acquisition proposal.
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Notwithstanding the foregoing restrictions, at any time prior to
the adoption of the merger agreement by our stockholders, we or
our board of directors (through the special committee or
otherwise) are permitted to furnish information to, or engage in
negotiations or discussions with, any party that submits a
written acquisition proposal after May 16, 2010 to the
extent that:
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we receive from such party a written acquisition proposal that
is not a result of a violation of the prohibitions described
above;
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our board of directors (acting through the special committee or
otherwise) determines in good faith, after consultation with its
advisors, that the acquisition proposal is, or could reasonably
be expected to result in, a superior proposal;
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after consultation with its outside counsel, our board of
directors (acting through the special committee or otherwise)
determines in good faith that the failure to take such actions
would be inconsistent with its fiduciary duties under applicable
law; and
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we receive from such party an executed confidentiality agreement
with terms no less favorable with regard to confidentiality than
those to which UHS agreed.
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In such cases, we (A) will promptly notify UHS within two
business days of the existence of an acquisition proposal from a
third party and provide the material terms and conditions of
such acquisition proposal and the identity of the person making
such acquisition proposal, and will keep UHS reasonably informed
of any material developments with respect to such acquisition
proposal and (B) promptly provide to UHS any material
non-public information concerning us or our subsidiaries
provided to such other party which was not previously provided
to UHS.
An acquisition proposal means any bona fide proposal
or offer (including any proposal from or to our stockholders)
from any party other than UHS or Merger Sub relating to
(A) any direct or indirect acquisition of (1) more
than 15% of the assets of us and our subsidiaries, taken as a
whole, or (2) more than 15% of any class of our equity
securities; (B) any tender offer or exchange offer, as
defined pursuant to the Exchange Act, that if consummated would
result in any person beneficially owning, directly or
indirectly, 15% or more of any class of our equity securities;
or (C) any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or other similar
transaction involving us.
A superior proposal means a bona fide written
acquisition proposal that (A) relates to more than 50% of
our outstanding Common Stock or more than 50% of the assets of
us and our subsidiaries, taken as a whole, (B) is on terms
that our board of directors determines in good faith (after
consultation with its financial and legal advisors and after
taking into account all financial, legal, regulatory and other
aspects of such acquisition proposal and of the merger
agreement, including the relative risks of non-consummation and
any changes to the terms of the merger agreement proposed by UHS
to us during the notice period described below in response to
such acquisition proposal or otherwise) are more favorable to
our stockholders than the terms of the merger agreement and
(C) our board of directors determines is reasonably capable
of being consummated.
Recommendation
Withdrawal/Termination in Connection with a Superior
Proposal
Except as set forth below, our board of directors (acting
through the special committee or otherwise) will not, and will
not publicly propose to, (A) withhold, withdraw or modify,
in a manner adverse to UHS or Merger Sub, its recommendation
that our stockholders adopt the merger agreement;
(B) approve or recommend any acquisition proposal; or
(C) approve or recommend, or cause or permit us or any of
our subsidiaries to enter into, any letter of intent, merger
agreement, acquisition agreement or similar agreement (other
than a confidentiality agreement on certain terms) with respect
to any acquisition proposal.
Notwithstanding the foregoing, prior to the adoption of the
merger agreement by our stockholders:
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in response to the receipt of a written acquisition proposal
that is not a result of a breach of the restrictions on
solicitation of other offers described above, if our board of
directors (acting through the special committee or otherwise)
(A) determines in good faith (after consultation with its
advisors) that such acquisition proposal is a superior proposal
and (B) determines in good faith (after consultation with
its outside legal counsel) that its failure to take such actions
would be inconsistent with its fiduciary duties under applicable
law, then our board of directors (acting through the special
committee or otherwise) may approve and recommend such superior
proposal (or any acquisition agreement with respect to such
superior proposal) and, in connection with the approval or
recommendation of such superior proposal, withdraw or modify its
recommendation that our stockholders adopt the merger agreement
and/or
cause
the Company to terminate the merger agreement; or
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other than in connection with an acquisition proposal, if our
board of directors (acting through the special committee or
otherwise) determines in good faith (after consultation with its
outside legal counsel) that its failure to take such actions
would be inconsistent with its fiduciary duties under
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applicable law, then our board of directors (acting through the
special committee or otherwise) may withdraw or modify its
recommendation that our stockholders adopt the merger agreement.
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Notwithstanding the foregoing, our board of directors may not
take either of the actions described above until at least five
business days after the Company provides UHS with written notice
advising that our board of directors intends to take such action
and specifying the reasons for doing so, including, if the basis
of the proposed action by our board of directors is a superior
proposal from a third party, the material terms and conditions
of any such superior proposal. During the
five-day
notice period we will, and will cause our financial advisors and
outside legal counsel to, negotiate with UHS in good faith (to
the extent UHS desires to negotiate). Any amendment to the terms
of a superior proposal will require us to send a new written
notice to UHS and extend the notice period by an additional two
business days. In determining whether to take either of the
actions described above, our board of directors will take into
account any changes to the terms of the merger agreement
proposed by UHS in response to the aforementioned notice or
otherwise.
If we terminate the merger agreement because our board of
directors (acting through the special committee or otherwise) is
approving and recommending a superior proposal (or any
acquisition agreement with respect to such superior proposal),
then we must concurrently pay to UHS the termination fee as
described in further detail below in
Termination Fee.
Efforts
to Complete the Merger
Subject to the terms and conditions set forth in the merger
agreement, each of the parties to the merger agreement has
agreed to use reasonable best efforts to:
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promptly obtain all authorizations, consents, orders and
approvals of all governmental authorities and officials that may
be or become necessary for its execution and delivery of, and
the performance of its obligations pursuant to, the merger
agreement;
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cooperate fully with the other parties in promptly seeking to
obtain all such authorizations, consents, orders, approvals,
licenses, permits and waivers;
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provide such other information to any governmental authority as
such governmental authority may reasonably request in connection
with the merger agreement;
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obtain all necessary consents, approvals or waivers from third
parties; and
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execute and deliver any additional instruments necessary to
consummate the transactions contemplated by and fully carry out
the purposes of the merger agreement.
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Each party also has agreed to make as promptly as practicable
its respective filing pursuant to the HSR Act and any other
applicable antitrust, competition or trade regulation law with
respect to the merger and to supply as promptly as practicable
to the appropriate governmental authorities any additional
information and documentary material that may be requested
pursuant to the HSR Act and any other applicable antitrust,
competition or trade regulation law.
Pursuant to the merger agreement, UHS has agreed to take any and
all steps necessary to avoid or eliminate each and every
impediment under any antitrust, competition or trade regulation
law that may be asserted by any governmental authority or any
other party so as to enable the parties to consummate the
transactions contemplated by the merger agreement, including
proposing, negotiating, committing to and effecting, by consent
decree, hold separate orders, or otherwise, the sale,
divestiture or disposition of such of its assets, properties or
businesses or of the assets, properties or businesses to be
acquired by it pursuant to the merger agreement. However any
such sale, divestiture, disposition or other arrangement must be
conditioned upon the consummation of the transactions
contemplated by the merger agreement. In addition, UHS has
agreed to defend through litigation on the merits any claim
asserted in court by any party in order to avoid entry of, or to
have vacated or terminated, any decree, order or judgment
(whether preliminary or permanent) that would prevent closing
prior to the date on which the merger agreement is terminated
pursuant to its terms. In no event, however, will UHS or any of
its subsidiaries be required to agree to or take any action
that, individually or in the aggregate, would result in it
making proposals, executing or carrying out agreements
53
(including consent decrees) or submitting to laws
(A) providing for the license, sale or other disposition or
holding separate (through the establishment of a trust or
otherwise) of any assets or categories of assets of UHS, the
Company or any of their respective subsidiaries or the holding
separate of the capital stock of the Company or any such
subsidiary or (B) imposing or seeking to impose any
limitation on the ability of UHS, the Company or any of their
respective subsidiaries to conduct their respective businesses
(including with respect to market practices and structure) or to
own such assets or to acquire, hold or exercise full rights of
ownership of the business of the Company or our subsidiaries or
of UHS or its subsidiaries, that would, individually or in the
aggregate, reasonably be expected to result in a material
adverse effect upon the Company and its subsidiaries and the
behavioral health care services business of UHS and its
subsidiaries, taken as a whole.
We have agreed to provide all reasonable cooperation in
connection with the arrangement of any financing necessary to
consummate the merger as may be reasonably requested by UHS and
that is necessary or customary in connection with UHS
efforts to obtain such financing; provided that (A) we are
not required to pay any commitment fee or any other fee or incur
any other liability in connection with such financing prior to
the effective time of the merger, and (B) the effectiveness
of any documentation we execute in connection with such
financing will be subject to the consummation of the merger. UHS
and Merger Sub have agreed to indemnify and hold harmless us and
our subsidiaries for and against any and all liabilities,
losses, damages and expenses suffered or incurred by us in
connection with the arrangement of such financing and any
information utilized in connection therewith.
We have agreed to commence as soon as reasonably practicable
after the receipt of a written request from UHS to do so, offers
to purchase and related consent solicitations with respect to
any or all of our outstanding debt securities specified by UHS
and permitted by applicable law on the terms and subject to
conditions reasonably requested by UHS. UHS will prepare,
subject to our review, all necessary documentation in connection
with any such offers or consent solicitations. The offers to
purchase the debt securities will be conditioned on the closing
of the merger. See The Merger Financing of the
Merger for a description of the financing arranged by UHS
to fund the proposed merger and related transactions.
Conditions
to the Merger
Conditions to Each Partys
Obligations.
Each partys obligation to
consummate the merger is subject to the satisfaction or waiver
(where permissible) of the following conditions:
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the merger agreement must have been adopted by the affirmative
vote of the holders of a majority of all outstanding shares of
Common Stock;
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no governmental authority will have enacted, issued,
promulgated, enforced or entered any law or taken any other
action after the date of the merger agreement which is in effect
and has the effect of restraining, enjoining or otherwise
prohibiting the consummation of the merger; and
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any waiting period (and any extension thereof) applicable to the
consummation of the merger under the HSR Act will have expired
or been terminated.
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Conditions to UHS and Merger Subs
Obligations.
The obligations of UHS and Merger
Sub to consummate the merger are subject to the satisfaction or
waiver (where permissible) of the following additional
conditions:
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the representations and warranties made by us in the merger
agreement with respect to our capital structure, authority
relative to the merger agreement, board approval and the
required stockholder vote will be true and correct in all
respects (except for de minimis failures to be true and correct)
as of the closing of the merger as though made as of such time
(except to the extent expressly made as of an earlier date, in
which case as of such earlier date);
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the representations and warranties made by us in the merger
agreement with respect to the lack of any event, circumstance,
state of facts, change or effect that, individually or in the
aggregate, has had or would reasonably be expected to have a
material adverse effect on us and our subsidiaries
since
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December 31, 2009 will be true and correct in all respects
as of the closing of the merger as though made as of such time;
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all other representations and warranties made by us in the
merger agreement will be true and correct (disregarding all
qualifications or limitations as to materiality and
material adverse effect set forth in such
representations and warranties) as of the closing of the merger
as though made as of such time (except to the extent expressly
made as of an earlier date, in which case as of such earlier
date), except where the failure to be so true and correct would
not, individually or in the aggregate, reasonably be expected to
have a material adverse effect on us; and
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we will have performed or complied in all material respects with
all material agreements and material covenants required by the
merger agreement to be performed or complied with by us on or
prior to the closing of the merger.
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Conditions to the Companys
Obligations.
Our obligation to complete the
merger is subject to the satisfaction or waiver of the following
additional conditions:
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the representations and warranties made by UHS and Merger Sub in
the merger agreement that are qualified as to materiality will
be true and correct in all respects, and those that are not so
qualified will be true and correct in all respects, in each case
as of the closing of the merger, as though made as of such time
(except to the extent expressly made as of an earlier date, in
which case as of such earlier date), except where the failure of
such representations and warranties to be so true and correct
would not, individually or in the aggregate, prevent or
materially delay consummation of any of the transactions
contemplated by the merger agreement or otherwise prevent or
materially delay UHS or Merger Sub from performing its
obligations under the merger agreement; and
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UHS and Merger Sub will have performed or complied in all
material respects with all material agreements and material
covenants required by the merger agreement to be performed or
complied with by them on or prior to the closing of the merger.
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If a failure to satisfy one or more of these conditions to the
merger is not considered by our board of directors to be
material to our stockholders, the board of directors (acting
through the special committee or otherwise) can waive compliance
with such condition or conditions. Our board of directors is not
aware of any condition to the merger that cannot be satisfied.
Under Delaware law, after the merger agreement has been adopted
by our stockholders, the merger consideration cannot be changed
and the merger agreement cannot be altered in a manner adverse
to our stockholders without re-submitting the revisions to our
stockholders for their approval.
Termination
of the Merger Agreement
The merger agreement may be terminated and the merger may be
abandoned at any time prior to the consummation of the merger,
whether before or after stockholder approval has been obtained:
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by mutual written consent of the Company and UHS;
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by either the Company or UHS if:
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the merger is not consummated on or before December 31,
2010, provided that such right will not be available to any
party whose failure to fulfill any material obligation under the
merger agreement has been the cause of, or resulted in, the
failure of the closing to occur on or before such date;
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if any governmental authority will have enacted, issued,
promulgated, enforced or entered any law or taken any other
action permanently restraining, enjoining or otherwise
prohibiting the consummation of the merger, and such law or
action will have become final and nonappealable, provided that
such right will not be available to any party whose failure to
fulfill any material obligation under the merger agreement has
been the principal cause of such action; or
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our stockholders do not adopt the merger agreement at the
special meeting or any adjournment thereof;
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our board of directors or any committee of our board of
directors (i) withholds, withdraws or modifies, in a manner
adverse to UHS or Merger Sub, its recommendation that our
stockholders adopt the merger agreement; (ii) approves or
recommends to our stockholders an acquisition proposal for us
from a third party; or (iii) approves or recommends, or
causes or permits us or any of our subsidiaries to enter into
any letter of intent, merger agreement, acquisition agreement or
similar agreement with respect to an acquisition proposal from a
third party, or will have publicly proposed to effect the
foregoing;
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we have materially breached our agreements and covenants related
to the solicitation or receipt of acquisition proposals from
third parties; or
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we have breached any of our representations or warranties, or
failed to perform any of our covenants or agreements set forth
in the merger agreement, which breach or failure to perform
would give rise to the failure of a certain condition to closing
and is incapable of being cured prior to December 31, 2010,
provided that neither UHS nor Merger Sub is then in material
breach of any of its representations, warranties, agreements or
covenants under the merger agreement;
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prior to our stockholders adoption of the merger agreement
at the special meeting or any adjournment thereof, our board of
directors (acting through the special committee or otherwise)
determines in good faith that a written acquisition proposal for
us from a third party is a superior proposal and that the
failure to terminate the merger agreement would be inconsistent
with its fiduciary duties; provided that we have complied with
our obligations under the merger agreement described under
Restrictions on Solicitations of Other
Offers and Recommendation
Withdrawal/Termination in Connection with a Superior
Proposal beginning on pages 51 and 52, respectively, and
provided that we have paid the termination fee owed to UHS as
described under Termination Fee
below; or
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UHS or Merger Sub has breached any of its representations or
warranties, or failed to perform any of its covenants or
agreements set forth in the merger agreement, which breach or
failure to perform would give rise to the failure of a certain
condition to closing and is incapable of being cured prior to
December 31, 2010, provided that we are not in material
breach of any of our representations, warranties, agreements or
covenants under the merger agreement.
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Termination
Fee
We have agreed to reimburse all of UHS
out-of-pocket
fees and expenses, if either we or UHS terminates the merger
agreement because of the failure to receive Company stockholder
approval at the special meeting or any adjournment thereof.
We must pay a termination fee of $71.5 million at the
direction of UHS if:
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we or UHS terminates the merger agreement because the merger has
not occurred prior to December 31, 2010 and (i) at or
prior to the termination date, an acquisition proposal involving
the purchase of more than 50% of our outstanding Common Stock or
50% of our assets and the assets of our subsidiaries has been
publicly announced and not publicly withdrawn or otherwise
becomes publicly known, and (ii) within 12 months
after such termination, we enter into, or submit to our
stockholders for adoption, an agreement with respect to, or
consummate, any acquisition proposal;
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UHS terminates the merger agreement because our board of
directors or any committee of our board of directors
(i) withholds, withdraws or modifies, in a manner adverse
to UHS or Merger Sub, its recommendation that our stockholders
adopt the merger agreement; (ii) approves or recommends to
our stockholders an acquisition proposal from a third party; or
(iii) approves or recommends, or causes or permits the
Company or any of its subsidiaries to enter into, any letter of
intent, merger agreement, acquisition agreement or similar
agreement with respect to an acquisition proposal from a third
party;
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UHS terminates the merger agreement because we have materially
breached our agreements and covenants related to the
solicitation or receipt of acquisition proposals from third
parties;
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we terminate the merger agreement, prior to our
stockholders adoption of the merger agreement because our
board of directors (acting through the special committee or
otherwise) has determined in good faith that a written
acquisition proposal for us from a third party is a superior
proposal and that the failure to terminate the merger agreement
would be inconsistent with its fiduciary duties;
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UHS terminates the merger agreement due to our breach of any of
our representations or warranties, or failure to perform any of
our covenants or agreements, set forth in the merger agreement,
which breach or failure to perform (i) would give rise to
the failure of the conditions to the obligations of UHS and
Merger Sub to consummate the merger and is incapable of being
cured prior to December 31, 2010, and (ii) at or prior
to the special meeting of our stockholders, an acquisition
proposal involving the purchase of more than 50% of our
outstanding Common Stock or 50% of our assets and the assets of
our subsidiaries has been publicly announced and not publicly
withdrawn or otherwise becomes publicly known, and
(iii) within 12 months after such termination, we
enter into, or submit to our stockholders for adoption, an
agreement with respect to, or consummate, any acquisition
proposal; or
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we or UHS terminates the merger agreement because of the failure
to receive Company stockholder approval at the special meeting
or at any adjournment thereof; provided that (i) at or
prior to the special meeting of our stockholders, an acquisition
proposal involving the purchase of more than 50% of our
outstanding Common Stock or 50% of our assets and the assets of
our subsidiaries has been publicly announced and not publicly
withdrawn or otherwise becomes publicly known, and
(ii) within 12 months after such termination, we enter
into, or submit to our stockholders for adoption, an agreement
with respect to, or consummate, any acquisition proposal.
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If we are obligated to pay a termination fee because any party
terminates the merger agreement due to the failure of our
stockholders to adopt the merger agreement, as described above,
any amounts previously paid to UHS as expense reimbursement will
be credited toward the termination fee payable by us. The
payment to UHS or its designees of the termination fee
and/or
reimbursement of UHS expenses will be the sole and
exclusive remedy of UHS for any loss suffered by UHS or Merger
Sub as a result of the failure of the merger to be consummated,
and upon such payment, we will not have any further liability or
obligation relating to or arising out of the merger agreement
(except in the case of fraud or a breach by the Company of the
merger agreement).
Employee
Benefits
UHS has agreed that, for a period of 18 months immediately
following the effective time of the merger, it will provide, or
cause the surviving corporation and its subsidiaries to provide,
each of our employees employed at the effective time of the
merger, with a base salary, employee benefits, incentive
compensation and other variable compensation (other than, in
each case, equity-based compensation) that, taken as a whole, is
no less favorable than those provided to each such employee
immediately prior to the effective time of the merger. UHS also
has agreed that, for the same
18-month
period, it will, or it will cause the surviving corporation and
its subsidiaries to, provide each such employee with
equity-based compensation that is no less favorable than the
equity-based compensation then provided to other similarly
situated employees of UHS and its subsidiaries. UHS has agreed
to cause the surviving corporation and its subsidiaries to honor
in accordance with their terms all contracts and commitments of
the Company that are applicable to any of our current or former
employees or directors, including all severance agreements.
UHS has agreed that our employees will receive credit for
service accrued or deemed accrued with us prior to the merger
for all purposes (other than benefit accruals under any defined
benefit pension plan) under any employee benefit plan, program
or arrangement established or maintained by UHS, the surviving
corporation or any of their respective subsidiaries under which
such employees may be eligible to participate on or after the
effective time of the merger to the same extent recognized by us
under comparable employee benefit plans prior to the merger. UHS
also has agreed (i) to waive, or cause its insurance
carrier to waive, all limitations as to pre-existing and at-work
conditions with respect to participation and coverage
requirements
57
applicable to each participating employee under any welfare
benefit plan (other than any dependent life insurance plan) of
UHS or its subsidiaries to the same extent waived under a
comparable Company plan and (ii) to provide credit to each
of our employees for any co-payments, deductibles and
out-of-pocket
expenses paid by such employees under our employee benefit plans
during the relevant plan year up to and including the effective
time of the merger.
Notwithstanding the foregoing, nothing in the merger agreement
(i) obligates UHS to continue the employment of any
specific person or (ii) prohibits or limits the ability of
UHS to amend, modify or terminate any employee benefit plans or
policies in accordance with their terms.
Indemnification
and Insurance
For a period of six years following the effective time of the
merger, UHS and the surviving corporation have agreed to
indemnify and hold harmless, to the fullest extent permitted by
law, each of the present and former directors and officers of
the Company and its subsidiaries against any and all costs and
expenses (including attorneys fees), judgments, fines,
losses, claims, damages, liabilities and settlement amounts paid
in connection with any claim, action, suit, proceeding or
investigation (whether arising before or after the effective
time of the merger), whether civil, criminal, administrative or
investigative, arising out of or pertaining to any action or
omission in their capacity as an officer, director, employee,
fiduciary or agent, whether occurring on or before the effective
time of the merger. Also, the surviving corporation will honor
and fulfill in all respects the obligations of the Company and
its subsidiaries under all indemnification agreements between
the Company or any of its subsidiaries and any of its or their
respective present or former directors and officers.
The surviving corporation has agreed to either (i) cause to
be obtained at the effective time of the merger tail
insurance policies with a claims period of at least six years
from the effective time of the merger with respect to
directors and officers liability insurance in amount
and scope at least as favorable as the Companys existing
policies for claims arising from facts or events that occurred
on or prior to the effective time of the merger, or
(ii) maintain in effect for six years from the effective
time of the merger, if available, the current directors
and officers liability insurance policies maintained by
the Company (provided that the surviving corporation may
substitute policies of at least the same coverage containing
terms and conditions that are not less favorable than the
current policies) with respect to matters occurring prior to the
effective time of the merger. If the annual premiums of
insurance coverage exceed 300% of the Companys current
annual premiums, UHS or the surviving corporation must obtain as
much coverage as is possible under substantially similar
policies for a cost not exceeding 300% of the current annual
premiums paid by the Company.
Specific
Performance; Remedies
In addition to any other right or remedy to which UHS, Merger
Sub or we may be entitled (including monetary damages), each
party is entitled to enforce any provision of the merger
agreement by a decree of specific performance and to temporary,
preliminary and permanent injunctive relief to prevent breaches
or threatened breaches of any of the provisions of the merger
agreement without posting any bond or other undertaking. All
expenses of the Company, UHS or Merger Sub incurred in
connection with any such legal action brought by the Company,
UHS or Merger Sub for specific performance or injunctive relief
will be paid by us if UHS is successful on the merits of such
legal action and will be paid by UHS if we are successful on the
merits of such legal action.
Amendment,
Extension and Waiver
The parties may amend the merger agreement at any time;
provided, however, that after we have obtained our
stockholders adoption of the merger agreement, there may
be no amendment that by law requires further approval by our
stockholders without such approval having been obtained. All
amendments to the merger agreement must be in writing signed by
UHS, Merger Sub and us.
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At any time before the consummation of the merger, each of the
parties to the merger agreement may, by written instrument:
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extend the time for the performance of any obligation or other
act of any other party;
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waive any inaccuracy in the representations and warranties of
any other party contained in the merger agreement or in any
document delivered pursuant to the merger agreement; or
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waive compliance with any agreement or condition contained in
the merger agreement.
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59
APPRAISAL
RIGHTS
Under the General Corporation Law of the State of Delaware
(the DGCL), you have the right to receive payment in
cash for the fair value of your Common Stock as determined by
the Delaware Court of Chancery, together with interest, if any,
as determined by the Chancery Court, in lieu of the
consideration you would otherwise be entitled to pursuant to the
merger agreement. These rights are known as appraisal rights.
The Companys stockholders electing to exercise appraisal
rights must comply with the provisions of Section 262 of
the DGCL in order to perfect their rights. The Company will
require strict compliance with the statutory procedures.
The following is intended as a brief summary of the material
provisions of the Delaware statutory procedures required to be
followed by a stockholder in order to perfect appraisal rights.
This summary, however, is not a complete statement of all
applicable requirements and is qualified in its entirety by
reference to Section 262 of the DGCL, the full text of
which appears in Annex C to this proxy statement. Failure
to precisely follow any of the statutory procedures set forth in
Section 262 of the DGCL may result in a termination or
waiver of your appraisal rights.
Section 262 requires that stockholders be notified that
appraisal rights will be available not less than 20 days
before the stockholders meeting to vote on the merger. A
copy of Section 262 must be included with the notice. This
proxy statement constitutes the Companys notice to its
stockholders of the availability of appraisal rights in
connection with the merger in compliance with the requirements
of Section 262. If you wish to consider exercising your
appraisal rights, you should carefully review the text of
Section 262 contained in Annex C since failure to
timely and properly comply with the requirements of
Section 262 will result in the loss of your appraisal
rights under the DGCL.
If you elect to demand appraisal of your shares, you must
satisfy each of the following conditions:
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you must deliver to the Company a written demand for appraisal
of your shares before the vote with respect to the merger is
taken. This written demand for appraisal must be in addition to
and separate from any proxy or vote abstaining from or voting
against the adoption of the merger agreement. Voting against or
failing to vote for the adoption of the merger agreement by
itself does not constitute a demand for appraisal within the
meaning of Section 262; and
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you must not vote in favor of the adoption of the merger
agreement. A vote in person, or a proxy submitted by mail, over
the Internet or by telephone, in favor of the adoption of the
merger agreement will constitute a waiver of your appraisal
rights in respect of the shares so voted and will nullify any
previously filed written demands for appraisal. If you fail to
comply with either of these conditions and the merger is
completed, you will be entitled to receive the cash payment for
your shares of Common Stock as provided for in the merger
agreement, but you will have no appraisal rights with respect to
your shares of Common Stock.
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All demands for appraisal should be addressed to Psychiatric
Solutions, Inc., 6640 Carothers Parkway, Suite 500,
Franklin, Tennessee 37067, Attention: Secretary, and must be
delivered before the vote on the merger agreement is taken at
the special meeting, and should be executed by, or on behalf of,
the record holder of the shares of Common Stock. The demand must
reasonably inform the Company of the identity of the stockholder
and the intention of the stockholder to demand appraisal of his,
her or its shares.
To be effective, a demand for appraisal by a holder of Common
Stock must be made by, or in the name of, the registered
stockholder, fully and correctly, as the stockholders name
appears on his or her stock certificate(s).
Beneficial owners
who do not hold the shares of record may not directly make
appraisal demands to the Company. The beneficial holder must, in
such cases, have the registered owner, such as a broker or other
nominee, submit the required demand in respect of those shares.
If shares are owned of record in a fiduciary capacity, such
as by a trustee, guardian or custodian, execution of a demand
for appraisal should be made by or for the fiduciary; and if the
shares are owned of record by more than one person, as in a
joint tenancy or tenancy in common, the demand should be
executed by or for all joint owners. An authorized agent,
including an authorized agent for two or more joint owners, may
execute the demand for appraisal for a stockholder of record;
however, the agent must identify the record owner or owners and
expressly disclose the
60
fact that, in executing the demand, he or she is acting as agent
for the record owner. A record owner, such as a broker, who
holds shares as a nominee for others, may exercise his or her
right of appraisal with respect to the shares held for one or
more beneficial owners, while not exercising this right for
other beneficial owners. In that case, the written demand should
state the number of shares as to which appraisal is sought.
Where no number of shares is expressly mentioned, the demand
will be presumed to cover all shares held in the name of the
record owner.
If you hold your shares of Common Stock in a brokerage
account or in other nominee form and you wish to exercise
appraisal rights, you should consult with your broker or the
other nominee to determine the appropriate procedures for the
making of a demand for appraisal by the nominee.
Within 10 days after the effective time of the merger, the
surviving corporation must give written notice that the merger
has become effective to each Company stockholder who has
properly filed a written demand for appraisal and who did not
vote in favor of the merger agreement. At any time within
60 days after the effective time, any stockholder who has
demanded an appraisal and who has not commenced or joined an
appraisal proceeding has the right to withdraw the demand and to
accept the cash payment specified by the merger agreement for
his or her shares of Common Stock. Within 120 days after
the effective time of the merger, any stockholder who has
complied with Section 262 will, upon written request to the
surviving corporation, be entitled to receive a written
statement setting forth the aggregate number of shares not voted
in favor of the merger agreement and with respect to which
demands for appraisal rights have been received and the
aggregate number of holders of the shares. The written statement
will be mailed to the requesting stockholder within 10 days
after the written request is received by the surviving
corporation or within 10 days after expiration of the
period for delivery of demands for appraisal, whichever is
later. Within 120 days after the effective time, either the
surviving corporation or any stockholder who has complied with
the requirements of Section 262 may file a petition in the
Delaware Court of Chancery demanding a determination of the fair
value of the shares held by all stockholders entitled to
appraisal. Upon the filing of the petition by a stockholder,
service of a copy of the petition will be made upon the
surviving corporation. The surviving corporation has no
obligation to file a petition in the event there are dissenting
stockholders. Accordingly, the failure of a stockholder to file
a petition within the period specified could nullify the
stockholders previously written demand for appraisal.
If a petition for appraisal is duly filed by a stockholder and a
copy of the petition is delivered to the surviving corporation,
the surviving corporation will then be obligated, within
20 days after receiving service of a copy of the petition,
to provide the Chancery Court with a duly verified list
containing the names and addresses of all stockholders who have
demanded an appraisal of their shares and with whom agreements
as to the value of their shares have not been reached by the
surviving corporation. After notice to dissenting stockholders
who demanded appraisal of their shares, the Chancery Court is
empowered to conduct a hearing upon the petition, and to
determine those stockholders who have complied with
Section 262 and who have become entitled to the appraisal
rights provided thereby. The Chancery Court may require the
stockholders who have demanded payment for their shares and who
hold certificated shares to submit their stock certificates to
the Register in Chancery for notation thereon of the pendency of
the appraisal proceedings; and if any stockholder fails to
comply with that direction, the Chancery Court may dismiss the
proceedings as to that stockholder.
After determination of the stockholders entitled to appraisal of
their shares of Common Stock, the Chancery Court will appraise
the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation
of the merger, together with interest, if any. When the value is
determined, the Chancery Court will direct the payment of that
value, with interest thereon accrued during the pendency of the
proceeding, if the Chancery Court so determines, to the
stockholders entitled to receive the same, and in the case of
stockholders holding certificated shares, upon surrender by the
holders of the certificates representing those shares.
In determining fair value, the Chancery Court is required to
take into account all relevant factors.
You should be aware
that the fair value of your shares as determined under
Section 262 could be more than,
61
the same as, or less than the value that you are entitled to
receive under the terms of the merger agreement.
Costs of the appraisal proceeding (which do not include
attorneys fees or the fees and expenses of experts) may be
imposed upon the surviving corporation and the stockholders
participating in the appraisal proceeding by the Chancery Court
as the Chancery Court deems equitable in the circumstances. Upon
the application of a stockholder, the Chancery Court may order
all or a portion of the expenses incurred by any stockholder in
connection with the appraisal proceeding, including, without
limitation, reasonable attorneys fees and the fees and
expenses of experts, to be charged pro rata against the value of
all shares entitled to appraisal. Any stockholder who had
demanded appraisal rights will not, after the effective time of
the merger, be entitled to vote shares subject to that demand
for any purpose or to receive payments of dividends or any other
distribution with respect to those shares, other than with
respect to payment as of a record date prior to the effective
time; however, if no appraisal proceeding has been timely filed
or if the stockholder delivers a written withdrawal of his or
her demand for appraisal and an acceptance of the terms of the
merger within 60 days after the effective time of the
merger, then the right of that stockholder to appraisal will
cease and that stockholder will be entitled to receive the cash
payment for shares of his, her or its Common Stock pursuant to
the merger agreement. Any withdrawal of a demand for appraisal
made more than 60 days after the effective time of the
merger may only be made with the written approval of the
surviving corporation. In addition, no appraisal proceeding may
be dismissed as to any stockholder without the approval of the
Chancery Court and such approval may be conditioned upon such
terms as the Chancery Court deems just.
In view of the complexity of Section 262, the
Companys stockholders who may wish to pursue appraisal
rights should consult their legal advisors.
62
MARKET
PRICE AND DIVIDEND DATA
The Common Stock is listed for trading on the NASDAQ under the
symbol PSYS. The following table sets forth, for the
fiscal quarters indicated, the high and low sales prices per
share as reported on the NASDAQ.
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High
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Low
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2008
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|
|
|
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First Quarter
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$
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34.31
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|
|
$
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27.17
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Second Quarter
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|
$
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39.62
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|
|
$
|
30.45
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Third Quarter
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|
$
|
40.90
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|
|
$
|
32.89
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|
Fourth Quarter
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|
$
|
39.00
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|
|
$
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22.86
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2009
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|
|
|
|
|
|
|
|
First Quarter
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|
$
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28.74
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|
|
$
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12.49
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|
Second Quarter
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|
$
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23.25
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|
|
$
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13.03
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|
Third Quarter
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|
$
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30.14
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|
|
$
|
20.98
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|
Fourth Quarter
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|
$
|
27.99
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|
|
$
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17.63
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|
2010
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|
|
|
|
|
|
|
|
First Quarter
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|
$
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30.87
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|
|
$
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20.50
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|
Second Quarter
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|
$
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33.25
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|
|
$
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28.33
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|
The closing sale price of Common Stock on the NASDAQ on
May 14, 2010, the last trading day prior to the
announcement of the merger, was $32.63 per share. On
March 9, 2006, which was the last trading day prior to the
day we announced that we had been approached by third parties in
connection with a potential acquisition of the Company, the
closing price of our common stock was $23.91 per share. The
$33.75 per share to be paid for each share of Common Stock in
the merger represents a premium of approximately 41.15% to the
closing price on March 9, 2010. The $33.75 per share to be
paid for each share of Common Stock in the merger represents a
premium of approximately 49.73% to the average closing price for
the month ended March 9, 2010, a premium of approximately
50.67% to the average closing price for the three months ended
March 9, 2010, and a premium of approximately 43.37% to the
average closing price for the six-month period ended
March 9, 2010. On [ ], 2010, the most
recent practicable date before this proxy statement was printed,
the closing price for the Common Stock on the NASDAQ was
$[ ] per share. You are encouraged to obtain
current market quotations for the Common Stock in connection
with voting your shares.
The Company has never declared or paid a cash dividend on the
Common Stock. It is the present policy of our board of directors
not to declare or pay cash dividends on the Common Stock, and we
are currently restricted by the merger agreement from paying
cash dividends.
63
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the
beneficial ownership of our Common Stock as of June 29,
2010 (unless otherwise noted) for:
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each person who is known by us to own beneficially more than 5%
of the outstanding shares of our Common Stock;
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|
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each of our current directors and executive officers;
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|
|
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all of our directors and executive officers as a group.
|
The percentages of shares outstanding provided in the tables are
based on 57,238,527 shares of Common Stock outstanding as
of June 29, 2010. Beneficial ownership is determined in
accordance with the rules of the SEC and generally includes
voting or investment power with respect to securities. Unless
otherwise indicated, each person or entity named in the table
has sole voting and investment power, or shares voting and
investment power with his or her spouse, with respect to all
shares of stock listed as owned by that person.
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Amount and
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Nature of
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Name of Beneficial Owner,
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Beneficial
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Percent of
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Executive Officer or Director
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Ownership(1)(2)
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Class
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Joey A. Jacobs(3)
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1,998,543
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3.4
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%
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Ronald M. Fincher(4)
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272,250
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|
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*
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Jack E. Polson(5)
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518,707
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|
|
|
*
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Brent Turner(6)
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425,758
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|
|
|
*
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Christopher L. Howard(7)
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317,743
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|
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*
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Christopher Grant, Jr.(8)
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33,400
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|
|
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*
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Edward K. Wissing(9)
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39,400
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|
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*
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Richard D. Gore(10)
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52,400
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|
|
*
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Mark P. Clein(11)
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38,804
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*
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William M. Petrie, M.D.(12)
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59,128
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*
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David M. Dill(13)
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42,400
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*
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Grupo Daniel Alonso S.L.(14)
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3,141,261
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5.5
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%
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BlackRock, Inc.(15)
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4,025,534
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7.0
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%
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SAC Capital(16)
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4,873,406
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8.5
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%
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All directors and executive officers as a group
(11 persons)(17)
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3,798,533
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6.4
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%
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(1)
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All share information presented in this table has been adjusted
to reflect the
two-for-one
stock split effected in the form of a stock dividend on
January 9, 2006.
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(2)
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Under SEC rules, the number of shares shown as beneficially
owned includes shares of Common Stock subject to options that
currently are exercisable or will be exercisable within sixty
(60) days of June 29, 2010. Shares of Common Stock
subject to options that are currently exercisable or will be
exercisable within 60 days of June 29, 2010 are
considered to be outstanding for the purpose of computing the
percentage of the shares held by a holder, but are not
considered to be outstanding for computing the percentage held
by others.
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(3)
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Includes options to purchase 1,362,931 shares of Common
Stock, 397,500 shares of restricted stock and
126,596 shares of Common Stock held by two Grantor Retained
Annuity Trusts, of which Mr. Jacobs is the trustee, for the
benefit of certain of Mr. Jacobs family members.
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(4)
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Includes options to purchase 128,500 shares of Common Stock
and 143,750 shares of restricted stock.
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(5)
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Includes options to purchase 328,499 shares of Common Stock
and 133,334 shares of restricted stock.
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(6)
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Includes options to purchase 232,699 shares of Common Stock
and 138,334 shares of restricted stock.
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64
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(7)
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Includes options to purchase 132,499 shares of Common Stock
and 131,334 shares of restricted stock.
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(8)
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Includes options to purchase 22,000 shares of Common Stock
and 5,600 shares of restricted stock.
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(9)
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Includes options to purchase 30,000 shares of Common Stock
and 5,600 shares of restricted stock.
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(10)
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|
Includes options to purchase 36,000 shares of Common Stock
and 5,600 shares of restricted stock.
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(11)
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Includes options to purchase 22,000 shares of Common Stock
and 5,600 shares of restricted stock.
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(12)
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|
Includes options to purchase 34,000 shares of Common Stock
and 5,600 shares of restricted stock.
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(13)
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|
Includes options to purchase 34,000 shares of Common Stock
and 1,720 shares of Common Stock held in a custodial
account for his minor children and 5,600 shares of
restricted stock. Mr. Dill disclaims beneficial ownership
of the shares held in the custodial account for his minor
children.
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(14)
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Based solely on information contained in a Schedule 13G
filed by Grupo Daniel Alonso S.L. with the SEC on
January 3, 2008. Grupo Daniel Alonso S.L. has sole voting
power and sole dispositive power with respect to
3,141,261 shares of Common Stock. The address of Grupo
Daniel Alonso S.L. is Avenida Conde Guadalhorce,
57-59,
Aviles, Asturias, Spain 33400.
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(15)
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Based solely on information contained in a Schedule 13G
filed by BlackRock, Inc. with the SEC on January 29, 2010.
Of these shares, BlackRock, Inc. has sole voting power with
respect to 4,025,534 shares and sole dispositive power with
respect to 4,025,534 shares. The address of BlackRock, Inc.
is 40 East 52nd Street, New York, New York 10022.
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(16)
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Based solely upon a Schedule 13G filed on March 22,
2010 by Steven A. Cohen, SAC Capital Advisors, L.P., SAC Capital
Advisors, Inc., CR Intrinsic Investors, LLC, and Sigma Capital
Management, LLC, to which we refer collectively as SAC Capital.
Steven A. Cohen has shared voting power as to
4,873,406 shares and shared dispositive power as to
4,873,406 shares. SAC Capital Advisors, L.P. has shared
voting power as to 4,268,406 shares and shared dispositive
power as to 4,268,406 shares. SAC Capital Advisors, Inc.
has shared voting power as to 4,268,406 shares and shared
dispositive power as to 4,268,406 shares. SAC Capital
Advisors, LLC has shared voting power as to
4,266,341 shares and shared dispositive power as to
4,266,341 shares. CR Intrinsic Investors, LLC has shared
voting power as to 525,000 shares and shared dispositive
power as to 525,000 shares. Sigma Capital Management, LLC
has shared voting power as to 80,000 shares and shared
dispositive power as to 80,000 shares. The address of SAC
Capital is 72 Cummings Point Road, Stamford, Connecticut 06902.
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(17)
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|
Includes options to purchase 2,363,128 shares of Common
Stock and 977,852 shares of restricted stock.
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65
ADJOURNMENT
OF THE SPECIAL MEETING
(PROPOSAL NO. 2)
We may ask our stockholders to vote on a proposal to adjourn the
special meeting, if necessary or appropriate, to solicit
additional proxies if there are insufficient votes at the time
of the meeting to adopt the merger agreement. We currently do
not intend to propose adjournment of our special meeting if
there are sufficient votes to adopt the merger agreement. If the
proposal to adjourn our special meeting for the purpose of
soliciting additional proxies is submitted to our stockholders
for approval, such approval requires the affirmative vote of the
holders of a majority of the shares of Common Stock present or
represented by proxy and entitled to vote on the matter.
The board of directors recommends that you vote
FOR the adjournment of the special meeting, if
necessary, to solicit additional proxies.
66
OTHER
MATTERS
Other
Matters for Action at the Special Meeting
As of the date of this proxy statement, our board of directors
knows of no matters that will be presented for consideration at
the special meeting other than as described in this proxy
statement.
Future
Stockholder Proposals
If the merger is consummated, we will not have public
stockholders and there will be no public participation in any
future meeting of stockholders. However, if the merger is not
completed, we expect to hold a 2011 annual meeting of
stockholders. Any stockholder proposals to be considered timely
for inclusion in the proxy statement for the 2011 annual meeting
must be submitted in writing to Christopher L. Howard,
Executive Vice President, General Counsel and Secretary,
Psychiatric Solutions, Inc., 6640 Carothers Parkway,
Suite 500, Franklin, Tennessee 37067, and must be received
by December 9, 2010 (if the annual meeting is within
30 days of May 18, 2011) or a reasonable time
before the Company begins to print and send its proxy materials
for the annual meeting (if the annual meeting is more than
30 days before or after May 18, 2011). Such proposals
also must comply with the SECs rules concerning the
inclusion of stockholder proposals in company-sponsored proxy
materials as set forth in
Rule 14a-8
promulgated under the Exchange Act and our By-Laws. For other
stockholder proposals (outside of
Rule 14a-8),
the Companys By-Laws contain an advance notice provision
which requires that a stockholders notice of a proposal to
be brought before an annual meeting must be timely.
To be timely, a stockholders notice must be received at
our principal executive offices not less than 90 days nor
more than 120 days prior to the first anniversary of the
date that we mailed our proxy statement for the preceding
years annual meeting of stockholders. However, in the
event that our annual meeting is called for a date that is not
within 30 days before or after the first anniversary of the
preceding years annual meeting of stockholders, notice by
the stockholder will be timely if received by our Secretary not
later than the close of business on the tenth day following the
day on which notice of the date of the meeting was mailed or
public announcement of the date of such meeting was first made,
whichever first occurs. Under our By-Laws, notice with respect
to the 2011 annual meeting of stockholders must be received at
our principal executive offices between the dates of
December 9, 2010 and January 8, 2011, unless the 2011
annual meeting is called for a date that is not between
April 19, 2011 and June 18, 2011. The notice must set
forth the information required by the provisions of our By-Laws
dealing with stockholder proposals and nominations of directors.
67
WHERE YOU
CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements
and other information with the SEC under the Exchange Act. You
may read and copy any reports, proxy statements or other
information that we file at the SECs public reference room
located at 100 F Street, N.E., Room 1580,
Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330
for further information concerning the public reference room.
Our SEC filings also are available to the public at the
SECs website at
http://www.sec.gov.
We make available free of charge through our website, which you
can find at www.psysolutions.com, our annual report on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K,
and amendments to these reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act as soon as
reasonably practicable after we electronically file such
material with, or furnish it to, the SEC. Our website address is
provided as an inactive textual reference only. The information
provided on our website is not part of this proxy statement, and
therefore is not incorporated by reference.
Any person, including any beneficial owner to whom this proxy
statement is delivered, may request additional copies of this
proxy statement, without charge, by telephoning Innisfree
toll-free at
(877) 456-3510
(banks and brokers call collect at
(212) 750-5833),
by writing to Innisfree at 501 Madison Avenue, New York, New
York 10022, or by accessing the Companys website at
www.psysolutions.com.
THIS PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A
PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM
WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN THAT
JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED
IN THIS PROXY STATEMENT TO VOTE YOUR SHARES AT THE SPECIAL
MEETING. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS
PROXY STATEMENT. THIS PROXY STATEMENT IS DATED
[ ], 2010. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF
ANY DATE OTHER THAN THAT DATE, AND THE MAILING OF THIS PROXY
STATEMENT TO STOCKHOLDERS DOES NOT CREATE ANY IMPLICATION TO THE
CONTRARY.
68
ANNEX A
AGREEMENT
AND PLAN OF MERGER
among
UNIVERSAL HEALTH SERVICES, INC.,
OLYMPUS ACQUISITION CORP.
and
PSYCHIATRIC SOLUTIONS, INC.
Dated as of May 16, 2010
Table of
Contents
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Page
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|
ARTICLE I
THE MERGER
|
Section 1.01
|
|
The Merger
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|
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A-1
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|
Section 1.02
|
|
Closing
|
|
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A-1
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|
Section 1.03
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|
Effective Time
|
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A-1
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|
Section 1.04
|
|
Effect of the Merger
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A-2
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Section 1.05
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|
Certificate of Incorporation; By-Laws
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A-2
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|
Section 1.06
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|
Directors and Officers
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A-2
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|
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
|
Section 2.01
|
|
Conversion of Securities
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|
|
A-2
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|
Section 2.02
|
|
Exchange of Certificates
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|
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A-2
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Section 2.03
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|
Stock Transfer Books
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|
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A-4
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|
Section 2.04
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|
Company Stock Options and Restricted Stock
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|
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A-4
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Section 2.05
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|
Dissenting Shares
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|
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A-5
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|
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
|
Section 3.01
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|
Organization and Qualification; Subsidiaries
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A-5
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Section 3.02
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|
Certificate of Incorporation and By-Laws
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|
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A-6
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|
Section 3.03
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|
Capitalization
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A-6
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|
Section 3.04
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|
Authority Relative to This Agreement
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|
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A-7
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Section 3.05
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|
No Conflict; Required Filings and Consents
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A-8
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|
Section 3.06
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|
Permits; Compliance
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|
A-8
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Section 3.07
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|
SEC Filings; Financial Statements; Undisclosed Liabilities
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A-9
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Section 3.08
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|
Information Supplied
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|
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A-10
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Section 3.09
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|
Absence of Certain Changes or Events
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A-10
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Section 3.10
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|
Absence of Litigation
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A-10
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Section 3.11
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|
Employee Benefit Plans
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A-10
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Section 3.12
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|
Labor and Employment Matters
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|
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A-11
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Section 3.13
|
|
Real Property
|
|
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A-12
|
|
Section 3.14
|
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Taxes
|
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A-12
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Section 3.15
|
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Material Contracts
|
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A-13
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Section 3.16
|
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Insurance
|
|
|
A-13
|
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Section 3.17
|
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Environmental Matters
|
|
|
A-13
|
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Section 3.18
|
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Board Approval; Vote Required
|
|
|
A-14
|
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Section 3.19
|
|
Opinion of Financial Advisor
|
|
|
A-14
|
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Section 3.20
|
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Brokers
|
|
|
A-14
|
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|
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
|
Section 4.01
|
|
Corporate Organization
|
|
|
A-14
|
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Section 4.02
|
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Certificate of Incorporation and By-Laws
|
|
|
A-14
|
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Section 4.03
|
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Authority Relative to This Agreement
|
|
|
A-14
|
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Section 4.04
|
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No Conflict; Required Filings and Consents; Agreements
|
|
|
A-15
|
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A-i
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Page
|
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Section 4.05
|
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Information Supplied
|
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A-15
|
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Section 4.06
|
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Absence of Litigation
|
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A-15
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Section 4.07
|
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Operations of Merger Sub
|
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A-16
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Section 4.08
|
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Financing
|
|
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A-16
|
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Section 4.09
|
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Brokers
|
|
|
A-16
|
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ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
|
Section 5.01
|
|
Conduct of Business by the Company Pending the Merger
|
|
|
A-16
|
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Section 5.02
|
|
Conduct of Business by Parent and Merger Sub Pending the Merger
|
|
|
A-18
|
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ARTICLE VI
ADDITIONAL AGREEMENTS
|
Section 6.01
|
|
Proxy Statement; Company Stockholders Meeting
|
|
|
A-18
|
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Section 6.02
|
|
Access to Information; Confidentiality
|
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|
A-19
|
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Section 6.03
|
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Solicitation
|
|
|
A-19
|
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Section 6.04
|
|
Directors and Officers Indemnification and Insurance
|
|
|
A-21
|
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Section 6.05
|
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Employee Benefits Matters
|
|
|
A-22
|
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Section 6.06
|
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Financing
|
|
|
A-23
|
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Section 6.07
|
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Further Action
|
|
|
A-24
|
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Section 6.08
|
|
Obligations of Parent and Merger Sub
|
|
|
A-26
|
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Section 6.09
|
|
Public Announcements
|
|
|
A-26
|
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Section 6.10
|
|
Transfer Taxes
|
|
|
A-26
|
|
|
ARTICLE VII
CONDITIONS TO THE MERGER
|
Section 7.01
|
|
Conditions to the Obligations of Each Party
|
|
|
A-26
|
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Section 7.02
|
|
Conditions to the Obligations of Parent and Merger Sub
|
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|
A-26
|
|
Section 7.03
|
|
Conditions to the Obligations of the Company
|
|
|
A-27
|
|
|
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
|
Section 8.01
|
|
Termination
|
|
|
A-27
|
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Section 8.02
|
|
Effect of Termination
|
|
|
A-28
|
|
Section 8.03
|
|
Fees and Expenses
|
|
|
A-28
|
|
|
ARTICLE IX
GENERAL PROVISIONS
|
Section 9.01
|
|
Non-Survival of Representations, Warranties and Agreements
|
|
|
A-30
|
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Section 9.02
|
|
Notices
|
|
|
A-30
|
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Section 9.03
|
|
Certain Definitions
|
|
|
A-31
|
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Section 9.04
|
|
Severability
|
|
|
A-34
|
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Section 9.05
|
|
Disclaimer of Other Representations and Warranties
|
|
|
A-35
|
|
Section 9.06
|
|
Entire Agreement; Assignment
|
|
|
A-35
|
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Section 9.07
|
|
Parties in Interest
|
|
|
A-35
|
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Section 9.08
|
|
Remedies; Specific Performance; Expenses
|
|
|
A-35
|
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Section 9.09
|
|
Governing Law
|
|
|
A-36
|
|
Section 9.10
|
|
Waiver of Jury Trial
|
|
|
A-36
|
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A-ii
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Page
|
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Section 9.11
|
|
Amendment
|
|
|
A-36
|
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Section 9.12
|
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Waiver
|
|
|
A-36
|
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Section 9.13
|
|
Headings
|
|
|
A-36
|
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Section 9.14
|
|
Counterparts
|
|
|
A-36
|
|
Exhibit A
|
|
Form of Amended and Restated Certificate of Incorporation
|
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|
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Exhibit B
|
|
Form of Amended and Restated By-Laws
|
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A-iii
AGREEMENT AND PLAN OF MERGER, dated as of May 16, 2010
(this
Agreement
), among UNIVERSAL HEALTH
SERVICES, INC., a Delaware corporation
(
Parent
), OLYMPUS ACQUISITION CORP., a
Delaware corporation and a wholly owned Subsidiary of Parent
(
Merger Sub
), and PSYCHIATRIC SOLUTIONS,
INC., a Delaware corporation (the
Company
).
RECITALS
WHEREAS, upon the terms and subject to the conditions of this
Agreement and in accordance with the General Corporation Law of
the State of Delaware, as amended (the
DGCL
),
Parent, Merger Sub and the Company have agreed to enter into a
business combination transaction pursuant to which Merger Sub
will merge with and into the Company, with the Company
continuing as the Surviving Corporation (the
Merger
);
WHEREAS, the Board of Directors of the Company (the
Company Board
), acting upon the unanimous
recommendation of the Special Committee, has (i) determined
that the Merger is fair to, and in the best interests of, the
Company and its stockholders, (ii) approved this Agreement
and declared its advisability and (iii) resolved to
recommend the adoption of this Agreement by the stockholders of
the Company at the Company Stockholders Meeting;
WHEREAS, the Board of Directors of Merger Sub has
(i) approved this Agreement and declared its advisability
and (ii) resolved to recommend the adoption of this
Agreement by the stockholder of Merger Sub;
WHEREAS, (i) the Board of Directors of Parent has approved
this Agreement and (ii) immediately following the execution
of this Agreement, Parent, as the sole stockholder of Merger
Sub, shall adopt this Agreement; and
WHEREAS, upon consummation of the Merger, each issued and
outstanding share of common stock, par value $0.01 per share, of
the Company (the
Company Common Stock
) (other
than the Shares described in Section 2.01(b) and Dissenting
Shares) will be converted into the right to receive $33.75 per
share in cash, upon the terms and subject to the conditions of
this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be
legally bound hereby, Parent, Merger Sub and the Company hereby
agree as follows:
ARTICLE I
THE MERGER
Section
1.01
The
Merger
.
Upon the terms and subject to the
conditions set forth in Article VII, and in accordance with
the DGCL, at the Effective Time, Merger Sub shall be merged with
and into the Company. At the Effective Time, the separate
corporate existence of Merger Sub shall cease and the Company
shall continue as the surviving corporation of the Merger (the
Surviving Corporation
).
Section
1.02
Closing
.
Unless
this Agreement shall have been terminated in accordance with
Section 8.01, the closing of the Merger (the
Closing
) will take place at 9:00 a.m.,
New York time, on the second business day after the later to be
satisfied of the condition set forth in Section 7.01(a) or
Section 7.01(c) (subject to the satisfaction or waiver
(where permissible) of the other conditions to Closing set forth
in Article VII, other than those that by their terms are to
be satisfied at the Closing, but subject to the satisfaction or
waiver (where permissible) of such conditions at the Closing),
at the offices of Shearman & Sterling LLP, 599
Lexington Avenue, New York, New York 10022, unless another time,
date
and/or
place is agreed to in writing by Parent and the Company.
Section
1.03
Effective
Time
.
Immediately following the Closing, the
parties hereto shall cause the Merger to be consummated by
filing with the Secretary of State of the State of Delaware a
certificate of merger (the
Certificate of
Merger
) in such form as is required by, and executed
and acknowledged in accordance with, the relevant provisions of
the DGCL. The Merger shall become effective at such date and
time as the Certificate of Merger is duly filed with the
Secretary of State of the State of Delaware or at such
A-1
subsequent date and time as Parent and the Company shall agree
and specify in the Certificate of Merger. The date and time at
which the Merger becomes effective is referred to in this
Agreement as the
Effective Time
.
Section
1.04
Effect
of the Merger
.
At the Effective Time, the
effect of the Merger shall be as provided in the applicable
provisions of the DGCL.
Section
1.05
Certificate
of Incorporation; By-Laws
.
(a) At the
Effective Time, the Amended and Restated Certificate of
Incorporation of the Company, as amended, as in effect
immediately prior to the Effective Time, shall be amended to
read in its entirety as set forth in
Exhibit A
attached hereto and, as so amended, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter
amended in accordance with the provisions thereof and as
provided by Law.
(b) At the Effective Time, the By-Laws of the Company, as
in effect immediately prior to the Effective Time, shall be
amended and restated to read in their entirety as set forth in
Exhibit B
attached hereto and, as so amended and
restated, shall be the By-Laws of the Surviving Corporation
until thereafter amended as provided by Law, the Certificate of
Incorporation of the Surviving Corporation and such By-Laws.
Section
1.06
Directors
and Officers
.
The directors of Merger Sub
immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and By-Laws of
the Surviving Corporation, and the officers of the Company
immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed and
qualified or until the earlier of their death, resignation or
removal.
ARTICLE II
CONVERSION
OF SECURITIES; EXCHANGE OF CERTIFICATES
Section
2.01
Conversion
of Securities
.
At the Effective Time, by
virtue of the Merger and without any action on the part of
Merger Sub, the Company or the holders of any of the following
securities:
(a)
Conversion of Company Common
Stock
.
Each share of Company Common Stock
(all issued and outstanding shares of Company Common Stock being
hereinafter collectively referred to as the
Shares
) issued and outstanding immediately
prior to the Effective Time (except as set forth in
Section 2.01(b) and any Dissenting Shares) shall be
canceled and shall be converted automatically into the right to
receive $33.75 in cash, without interest (the
Merger
Consideration
). The Merger Consideration is payable in
accordance with Section 2.02(b).
(b)
Cancellation of Treasury Stock and Parent-Owned
Stock
.
Each Share held in the treasury of the
Company and each Share owned by Merger Sub or Parent immediately
prior to the Effective Time shall automatically be canceled
without any conversion thereof and no payment or distribution
shall be made with respect thereto.
(c)
Capital Stock of Merger
Sub
.
Each share of common stock, par value
$0.01 per share, of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into
and become one validly issued, fully paid and nonassessable
share of common stock, par value $0.01 per share, of the
Surviving Corporation.
Section
2.02
Exchange
of Certificates
.
(a)
Paying Agent
.
Prior to the Effective Time, Parent shall (i) appoint a
bank or trust company reasonably acceptable to the Company (the
Paying Agent
), and (ii) enter into a
paying agent agreement, in form and substance reasonably
acceptable to the Company, with such Paying Agent for the
payment of the Merger Consideration in accordance with this
Article II. At the Effective Time, Parent shall deposit, or
cause the Surviving Corporation to deposit, with the Paying
Agent, for the benefit of the holders of Shares, cash in an
amount sufficient to pay the aggregate Merger Consideration
required to be paid pursuant to Section 2.01(a) (such cash
being hereinafter referred to as the
Exchange
Fund
). The Exchange Fund shall not be used for any
other purpose. The Exchange Fund shall be invested by the Paying
Agent as directed by Parent;
provided
,
however
,
that such investments shall be in obligations of or
A-2
guaranteed by the United States of America or any agency or
instrumentality thereof and backed by the full faith and credit
of the United States of America, in commercial paper obligations
rated
A-1
or
P-1
or
better by Moodys Investors Service, Inc. or
Standard & Poors Corporation, respectively, or
in certificates of deposit, bank repurchase agreements or
bankers acceptances of commercial banks with capital
exceeding $1 billion (based on the most recent financial
statements of such bank which are then publicly available). Any
net profit resulting from, or interest or income produced by,
such investments shall be payable to the Surviving Corporation.
(b)
Exchange Procedures
.
Promptly
after the Effective Time, Parent shall cause to be mailed to
each person who was, at the Effective Time, a holder of record
of Shares entitled to receive the Merger Consideration pursuant
to Section 2.01(a): (i) a letter of transmittal (which
shall be in customary form and shall specify that delivery shall
be effected, and risk of loss and title to the Shares shall
pass, only upon proper delivery of the Shares to the Paying
Agent) and (ii) instructions for use in effecting the
surrender of the certificates evidencing such Shares (the
Certificates
) or the non-certificated Shares
represented by book-entry (
Book-Entry Shares
)
in exchange for the Merger Consideration. Upon
(A) surrender of a Certificate to the Paying Agent for
cancellation, together with such letter of transmittal, duly
completed and validly executed in accordance with the
instructions thereto, or (B) receipt by the Paying Agent of
an agents message in the case of Book-Entry
Shares, and, in each case, such other documents as may be
required pursuant to such instructions, the holder of such
Shares shall be entitled to receive in exchange therefor the
Merger Consideration which such holder has the right to receive
pursuant to the provisions of this Article II, and the
Certificate or Book-Entry Shares so surrendered shall forthwith
be canceled. In the event of a transfer of ownership of Shares
that is not registered in the transfer records of the Company,
payment of the Merger Consideration may be made to a person
other than the person in whose name the Certificate or
Book-Entry Shares so surrendered are registered if the
Certificate or Book-Entry Shares representing such Shares shall
be presented to the Paying Agent, accompanied by all documents
required to evidence and effect such transfer or otherwise be in
proper form for transfer, and the person requesting such payment
shall pay any fiduciary or surety bonds or any transfer or other
Taxes required solely by reason of the payment of the Merger
Consideration to a person other than the registered holder of
such Certificate or Book-Entry Shares or establish to the
reasonable satisfaction of Parent that such Tax has been paid or
is not applicable. Until surrendered as contemplated by this
Section 2.02, each Certificate or Book-Entry Share shall be
deemed at all times after the Effective Time to represent only
the right to receive upon such surrender the Merger
Consideration to which the holder of such Certificate or
Book-Entry Share is entitled pursuant to this Article II.
No interest shall be paid or will accrue on any cash payable to
holders of Certificates or Book-Entry Shares pursuant to the
provisions of this Article II.
(c)
No Further Rights
.
From and
after the Effective Time, holders of Shares shall cease to have
any rights as stockholders of the Company, except as provided
herein or by Law.
(d)
Termination of Exchange
Fund
.
Any portion of the Exchange Fund that
remains undistributed to the holders of Shares one year after
the Effective Time shall be delivered to the Surviving
Corporation, upon demand, and any holders of Shares who have not
theretofore complied with this Article II shall thereafter
look only to Parent or the Surviving Corporation for, and Parent
and the Surviving Corporation shall remain liable for, payment
of their claim for the Merger Consideration. Any portion of the
Exchange Fund remaining unclaimed by holders of Shares as of a
date which is immediately prior to such time as such amounts
would otherwise escheat to or become property of any
Governmental Authority shall, to the extent permitted by
applicable Law, become the property of Parent free and clear of
any claims or interest of any person previously entitled thereto.
(e)
No Liability
.
None of the
Paying Agent, Parent, Merger Sub or the Surviving Corporation
shall be liable to any holder of Shares for any cash (including
any dividends or distributions with respect to such Shares)
delivered to a public official pursuant to any abandoned
property, escheat or similar Law.
(f)
Withholding Rights
.
Each of
the Paying Agent, the Surviving Corporation and Parent shall be
entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of Shares or
Company Stock Options such amounts as it is required to deduct
and withhold with
A-3
respect to such payment under all applicable federal, state or
local Tax Laws and pay such withholding amount over to the
appropriate taxing authority. To the extent that amounts are so
properly withheld by the Paying Agent, the Surviving Corporation
or Parent, as the case may be, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid
to the holder of the Shares or Company Stock Options in respect
of which such deduction and withholding was made by the Paying
Agent, the Surviving Corporation or Parent, as the case may be.
(g)
Lost Certificates
.
If any
Certificate shall have been lost, stolen or destroyed, then upon
(i) the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed, and
(ii) if required by the Surviving Corporation, the posting
by such person of an indemnity bond in form and substance and
with surety reasonably satisfactory to the Surviving
Corporation, the Paying Agent shall pay in respect of such lost,
stolen or destroyed Certificate the Merger Consideration to
which the holder thereof is entitled pursuant to
Section 2.01(a).
Section
2.03
Stock
Transfer Books
.
At the Effective Time, the
stock transfer books of the Company shall be closed and there
shall be no further registration of transfers of Shares that
were outstanding immediately prior to the Effective Time on the
records of the Company. From and after the Effective Time, the
holders of Shares outstanding immediately prior to the Effective
Time shall cease to have any rights with respect to such Shares,
except as otherwise provided in this Agreement or by Law. On or
after the Effective Time, any Certificates or Book-Entry Shares
presented to the Paying Agent or Parent for any reason shall be
canceled against delivery of the Merger Consideration to which
the holders thereof are entitled pursuant to
Section 2.01(a).
Section
2.04
Company
Stock Options and Restricted
Stock
.
(a) Between the date of this
Agreement and the Effective Time, the Company shall take all
necessary action (which action shall be effective as of the
Effective Time), to (i) terminate the Psychiatric
Solutions, Inc. Equity Incentive Plan, the Psychiatric
Solutions, Inc. Outside Directors Stock Incentive Plan and
the 2010 Long-Term Equity Compensation Plan (collectively, the
Company Stock Plans
), (ii) provide that
each outstanding option to purchase shares of Company Common
Stock granted under the Company Stock Plans (each, a
Company Stock Option
) that is outstanding and
unexercised as of immediately prior to the Effective Time,
whether or not vested or exercisable, shall become fully vested
and exercisable as of the Effective Time, (iii) cancel, as
of the Effective Time, each Company Stock Option that is
outstanding and unexercised, as of the Effective Time (in each
case, without the creation of additional liability to the
Company or any Subsidiaries), subject, if applicable, to the
payment pursuant to Section 2.04(b) and (iv) provide
that each share of restricted Company Common Stock granted under
the Company Stock Plans that is outstanding as of immediately
prior to the Effective Time shall become fully vested and
transferable and that all restrictions on such restricted
Company Common Stock shall lapse as of the Effective Time and
accordingly will be eligible to receive the per share Merger
Consideration pursuant to Section 2.01(a).
(b) Each holder of a Company Stock Option that is
outstanding and unexercised as of immediately prior to the
Effective Time and has an exercise price per Share that is less
than the per share Merger Consideration shall (subject to the
provisions of this Section 2.04) be paid by the Surviving
Corporation promptly after the Effective Time, in exchange for
the cancellation of such Company Stock Option, an amount in cash
equal to the product of (i) the difference between the per
share Merger Consideration and the applicable exercise price of
such Company Stock Option, and (ii) the aggregate number of
Shares that remain issuable upon exercise of such Company Stock
Option. Any such payments shall be subject to all applicable
federal, state and local Tax withholding requirements. In the
event that the exercise price per share of a Company Stock
Option is greater than or equal to the per share Merger
Consideration, such Company Stock Option shall be canceled
without consideration and have no further force or effect.
(c) Prior to the Effective Time, the Company shall take all
steps reasonably necessary to cause the Transactions and any
other dispositions of Company Common Stock or other equity
securities of the Company (including derivative securities) in
connection with this Agreement by each person who is a director
or officer of the Company to be exempt under
Rule 16b-3
promulgated under the Exchange Act, as amended.
A-4
Section
2.05
Dissenting
Shares
.
(a) Notwithstanding any
provision of this Agreement to the contrary and to the extent
available under the DGCL, Shares that are outstanding
immediately prior to the Effective Time and that are held by any
stockholder who is entitled to demand and properly demands the
appraisal for such Shares (the
Dissenting
Shares
) pursuant to, and who complies in all respects
with, the provisions of Section 262 of the DGCL
(
Section 262
) shall not be converted
into, or represent the right to receive, the Merger
Consideration. Any such stockholder shall instead be entitled to
receive payment of the fair value of such stockholders
Dissenting Shares in accordance with the provisions of
Section 262;
provided
,
however
, that all
Dissenting Shares held by any stockholder who shall have failed
to perfect or who otherwise shall have withdrawn or lost such
stockholders rights to appraisal of such Shares under
Section 262 shall thereupon be deemed to have been
converted into, and to have become exchangeable for, as of the
Effective Time, the right to receive the Merger Consideration,
without any interest thereon, upon surrender in the manner
provided in Section 2.02 of any Certificate or the
Book-Entry Shares that formerly evidenced such Shares.
(b) The Company shall give Parent (i) prompt notice of
any demands received by the Company for appraisal of any Shares,
withdrawals of such demands and any other instruments served
pursuant to the DGCL and received by the Company and
(ii) the opportunity to participate in and direct all
negotiations and proceedings with respect to demands for
appraisal under the DGCL. The Company shall not, except with the
prior written consent of Parent, make any payment with respect
to any demands for appraisal or offer to settle or settle any
such demands.
ARTICLE III
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule delivered by the
Company to Parent and Merger Sub concurrently with the execution
and delivery of this Agreement (the
Company Disclosure
Schedule
) (
provided
that, disclosure of any
fact or item in any section of the Company Disclosure Schedule
shall, should the existence of such fact or item be relevant to
any other section, be deemed to be disclosed with respect to
that other section so long as the relevance of such disclosure
to such other section is reasonably apparent on its face), or as
disclosed in the SEC Reports (but excluding any disclosures set
forth in any risk factor section, any disclosures in any section
relating to forward looking statements and any other disclosures
included therein to the extent they are predictive or
forward-looking in nature) filed prior to the date of this
Agreement, and in each case subject to Section 3.09(a), the
Company hereby represents and warrants to Parent and Merger Sub
as follows:
Section
3.01
Organization
and Qualification;
Subsidiaries
.
(a) Each of the Company
and each Subsidiary of the Company is a corporation, limited
liability company, general partnership, or limited partnership
duly organized, validly existing and in good standing under the
Laws of the jurisdiction of its organization and has the
requisite power and authority to own, lease and operate its
properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, validly
existing and in good standing would not, individually or in the
aggregate, reasonably be expected to have a Company Material
Adverse Effect. Each of the Company and each Subsidiary of the
Company is duly qualified or licensed as a foreign corporation
to do business, and is in good standing, in each jurisdiction
where the character of the properties owned, leased or operated
by it or the nature of its business makes such qualification or
licensing necessary, except for such failures to be so qualified
or licensed and in good standing that would not, individually or
in the aggregate, reasonably be expected to have a Company
Material Adverse Effect. The term
Company Material
Adverse Effect
means (i) any event, circumstance,
state of facts, change or effect that is materially adverse to
the business, financial condition or results of operations of
the Company and its Subsidiaries, taken as a whole, or
(ii) any event, circumstance, state of facts, change or
effect that would prevent or materially delay the consummation
of the Merger or otherwise prevent the Company from performing
its obligations under this Agreement;
provided
,
however
, that in no event shall any of the following,
alone or in combination, be deemed to constitute, nor shall any
of the following be taken into account in determining whether
there has been or would reasonably be expected to be, a Company
Material Adverse Effect (except, in the case of clauses (A)(1),
(A)(2) or (A)(4) below, to the extent any of the
A-5
matters referred to therein has had or would reasonably be
expected to have a disproportionate adverse effect on the
Company and its Subsidiaries, taken as a whole, as compared to
other for-profit and comparable or similar companies operating
in the industries in which the Company and its Subsidiaries
operate, after taking into account the size of the Company
relative to such other for-profit companies): (A) any
event, circumstance, state of facts, change or effect resulting
from or relating to (1) a change in general economic,
political or financial market conditions, including interest or
exchange rates, (2) a change generally affecting the
industries in which the Company and its Subsidiaries operate
(including seasonal fluctuations) or general economic conditions
that generally affect the industries in which the Company and
its Subsidiaries conduct their business, (3) any change in
accounting requirements or principles required by GAAP (or any
interpretations thereof) or required by any change in applicable
Laws (or any interpretations thereof), (4) any adoption,
implementation, promulgation, repeal, modification,
reinterpretation or proposal of any Law after the date hereof,
(5) any Action, investigation, review or examination
undertaken by a Governmental Authority, or any sanction, fine,
operating restriction or other similar penalty arising as a
result thereof, with respect to any Company Health Care Business
or Company Health Care Facility (a
Regulatory
Condition
), that is currently pending or arises after
the date of this Agreement, in each case to the extent such
Regulatory Condition is consistent in nature, scope and impact
on the Company and its Subsidiaries, taken as a whole, with
Regulatory Conditions arising and fully resolved from time to
time in the conduct of the business of the Company and its
Subsidiaries on or before December 31, 2009, (6) any
acts of terrorism or war or any weather related event, fire or
natural disaster or any escalation thereof, (7) the
announcement of the execution of this Agreement or the pendency
or consummation of the Merger and the other transactions
contemplated by this Agreement (collectively, the
Transactions
), including any Actions,
challenges or investigations to the extent relating to this
Agreement or the Transactions made or brought by any of the
current or former stockholders of the Company (on their own
behalf or on behalf of the Company), (8) the identity of
Parent or any of its affiliates as the acquiror of the Company
or any facts or circumstances concerning Parent or any of its
affiliates, or (9) compliance with the terms of, the taking
of any action required or the failure to take any action
prohibited by, this Agreement or the taking of any action
consented to or requested by Parent or (B) any failure, in
and of itself, to meet internal or published projections,
forecasts, performance measures, operating statistics or revenue
or earnings predictions for any period or a decline in the price
or trading volume of the Company Common Stock (
provided
that, except as otherwise provided in this definition, the
underlying causes of such failure or decline may be taken into
account in determining whether there is a Company Material
Adverse Effect).
(b) A true and complete list of all the Subsidiaries of the
Company, together with the jurisdiction of organization of each
such Subsidiary and the percentage of the outstanding capital
stock or other equity interests of each such Subsidiary owned by
the Company, each other Subsidiary of the Company and any other
person, is set forth in Section 3.01(b) of the Company
Disclosure Schedule. None of the Company or any of its
Subsidiaries directly or indirectly owns any material equity or
similar interest in, or any interest convertible into or
exchangeable or exercisable for any equity or similar interest
in, any corporation, partnership, joint venture or other
business association or entity (other than the Subsidiaries of
the Company).
Section
3.02
Certificate
of Incorporation and By-Laws
.
The Company has
made available to Parent a complete and correct copy of the
Certificate of Incorporation and the By-Laws (or similar
organizational documents), each as amended to date, of the
Company and each of its Subsidiaries. Such Certificates of
Incorporation and By-Laws or similar organizational documents
are in full force and effect. Neither the Company nor any of its
Subsidiaries is in violation of any of the provisions of its
Certificate of Incorporation or By-Laws or similar
organizational documents, except, in the case of any Subsidiary
of the Company, for violations that, individually or in the
aggregate, would not reasonably be expected to have a Company
Material Adverse Effect.
Section
3.03
Capitalization
.
(a) The
authorized capital stock of the Company consists of
(i) 125,000,000 shares of Company Common Stock and
(ii) 1,186,530 shares of preferred stock, par value
$0.01 per share (
Company Preferred Stock
).
(b) As of May 6, 2010, (i) 57,169,871 shares
of Company Common Stock (including 1,302,327 shares of
restricted Company Common Stock granted under the Company Stock
Plans) were issued and outstanding, all
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of which are validly issued, fully paid and nonassessable and
were issued free of preemptive (or similar) rights, (ii) no
shares of Company Common Stock were held in the treasury of the
Company, (iii) no shares of Company Common Stock were held
by the Subsidiaries of the Company,
(iv) 7,037,405 shares of Company Common Stock were
reserved for future issuance in connection with the Company
Stock Plans (including 6,509,150 shares reserved pursuant
to outstanding Company Stock Options. Since May 6, 2010,
through the date of this Agreement, other than in connection
with the issuance of Shares pursuant to the exercise of Company
Stock Options outstanding as of May 6, 2010, there has been
no change in the number of shares of outstanding capital stock
of the Company or the number of outstanding Company Stock
Options. As of the date of this Agreement, no shares of Company
Preferred Stock are issued and outstanding. Except as set forth
in this Section 3.03, there are no options, warrants or
other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of
the Company or any Subsidiary or obligating the Company or any
of its Subsidiaries to issue or sell any shares of capital stock
of, or other equity interests in, the Company or any of its
Subsidiaries. All shares of Company Common Stock subject to
issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid
and nonassessable and free of preemptive (or similar) rights.
There are no material outstanding contractual obligations of the
Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock or options,
warrants or other rights to acquire shares of capital stock of
the Company or of any Subsidiary of the Company, or to provide
funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any such Subsidiary or any other
person. There are no bonds, debentures, notes or other
indebtedness of the Company or any of its Subsidiaries having
the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which
holders of Company Common Stock may vote (
Voting
Company Debt
). Except for any obligations pursuant to
this Agreement, the Company Stock Plans, or as otherwise set
forth above, there are no options, warrants, rights, convertible
or exchangeable securities, stock-based performance units,
Contracts or undertakings of any kind to which the Company or
any of its Subsidiaries is a party or by which any of them is
bound (1) obligating the Company or any such Subsidiary to
issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other equity
interests in, or any security convertible or exchangeable for
any capital stock of or other equity interest in, the Company or
any of its Subsidiaries or any Voting Company Debt,
(2) obligating the Company or any such Subsidiary to issue,
grant or enter into any such option, warrant, right, security,
unit, Contract or undertaking or (3) that give any person
the right to receive any economic interest of a nature accruing
to the holders of any Company Common Stock. Section 3.03(b)
of the Company Disclosure Schedule sets forth a true and
complete list, as of the date of this Agreement, of all
outstanding indebtedness for borrowed money of the Company and
its Subsidiaries (other than any such indebtedness owed to the
Company or any of its Subsidiaries, letters of credit and any
other indebtedness with an aggregate principal amount not in
excess of $1.0 million individually). None of the Company
or any of its Subsidiaries is a party to any stockholders
agreement, voting trust agreement or registration rights
agreement relating to any equity securities of the Company or
any of its Subsidiaries or any other Contract relating to
disposition, voting or dividends with respect to any equity
securities of the Company or of any of its Subsidiaries.
Section 3.03(b) of the Company Disclosure Schedule sets
forth, as of the date of this Agreement, a complete and correct
list of all outstanding Company Stock Options, and all shares of
restricted Company Common Stock granted under the Company Stock
Plans, and the number of unpurchased Shares subject to each such
Company Stock Option and the grant date, exercise price, and
expiration date of each such Company Stock Option.
(c) Each outstanding share of capital stock, each limited
liability company membership interest and each partnership
interest of each Subsidiary of the Company is duly authorized,
validly issued, fully paid and nonassessable and was issued free
of preemptive (or similar) rights, and each such share or
interest is owned by the Company or another Subsidiary of the
Company free and clear of all options, rights of first refusal,
agreements, limitations on the Companys or any of its
Subsidiaries voting, dividend or transfer rights, charges
and other encumbrances or Liens of any nature whatsoever.
Section
3.04
Authority
Relative to This Agreement
.
The Company has
all necessary corporate power and authority to execute and
deliver this Agreement, and, subject to the receipt of the
Stockholder Approval, to perform its obligations hereunder and
to consummate the Transactions. The execution, delivery and
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performance of this Agreement by the Company and the
consummation by the Company of the Transactions have been duly
and validly authorized by all necessary corporate action, and no
other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the
Transactions (other than, with respect to the Merger, the
receipt of the Stockholder Approval with respect to the adoption
of this Agreement and the filing and recordation of appropriate
merger documents as required by the DGCL). This Agreement has
been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by Parent
and Merger Sub, constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms, subject to the effect of any
applicable bankruptcy, insolvency (including all Laws relating
to fraudulent transfers), reorganization, moratorium or similar
Laws affecting creditors rights generally and subject to
the effect of general principles of equity (regardless of
whether considered in a proceeding at law or in equity).
Section
3.05
No
Conflict; Required Filings and
Consents
.
(a) The execution and delivery
of this Agreement by the Company do not, and the performance of
this Agreement by the Company and the consummation by the
Company of the Transactions will not, (i) conflict with or
violate the Certificate of Incorporation or By-Laws (or similar
organizational documents) of the Company or any of its
Subsidiaries, (ii) assuming that all consents, approvals
and other authorizations described in Section 3.05(b) have
been obtained, that all filings and other actions described in
Section 3.05(b) have been made or taken and the Stockholder
Approval has been obtained, conflict with or violate any
federal, state, local or foreign law, statute, ordinance or
common law, or any rule, regulation, standard, judgment, order,
writ, injunction or decree of any Governmental Authority,
including Health Care Laws (collectively,
Law
), applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or
any such Subsidiary is bound or affected, or (iii) result
in any breach or violation of or constitute a default (or an
event which, with notice or lapse of time or both, would become
a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the
creation of a Lien on any property or asset of the Company or
any such Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company
or any such Subsidiary is a party or by which the Company or any
such Subsidiary or any property or asset of the Company or any
such Subsidiary is bound or affected, except, with respect to
clauses (ii) and (iii), for any such conflicts, violations,
breaches, defaults or other occurrences which would not,
individually or in the aggregate, reasonably be expected to have
a Company Material Adverse Effect or materially delay the
consummation of the Transactions.
(b) The execution and delivery of this Agreement by the
Company do not, and the performance of this Agreement by the
Company and the consummation by the Company of the Transactions
will not, require any consent, approval, authorization or permit
of, or filing with or notification to, any federal, state, local
or foreign government, regulatory or administrative authority,
or any court, tribunal, or judicial or arbitral body (a
Governmental Authority
), except for
(i) applicable requirements, if any, of the Securities
Exchange Act of 1934, as amended (the
Exchange
Act
), (ii) the filing with the Securities and
Exchange Commission (the
SEC
) of a proxy
statement (as amended or supplemented from time to time, the
Proxy Statement
) relating to the adoption of
this Agreement by the Companys stockholders,
(iii) any filings required under the rules and regulations
of the NASDAQ Stock Market, (iv) the filing and recordation
of appropriate merger documents as required by the DGCL and
appropriate documents with the relevant authorities of other
states in which the Company or any Subsidiary is qualified to do
business, (v) the premerger notification and waiting period
requirements of the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder (the
HSR
Act
), (vi) applicable requirements, if any, of
Health Care Laws; (vii) applicable requirements, if any, of
Medicare, Medicaid, or any other similar state or federal health
care program (each, a
Government Program
) in
which the Company or any of its Subsidiaries participates; and
(viii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or
notifications, would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.
Section
3.06
Permits;
Compliance
.
Each of the Company and each
Subsidiary of the Company is in possession of all licenses,
interim licenses, qualifications, exemptions, registrations,
permits, approvals,
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accreditations, certificates of occupancy and other
certificates, franchises and other authorizations of any
Governmental Authority necessary for each such entity to own,
lease and operate its properties or to carry on its business as
it is now being conducted (the
Company
Permits
), except where the failure to have, or the
suspension or cancellation of, any of the Company Permits would
not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect. As of the date of this
Agreement, no suspension or cancellation of any of the Company
Permits is pending or, to the knowledge of the Company,
threatened in writing, except where the failure to have, or the
suspension or cancellation of, any of the Company Permits would
not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect. Neither the Company nor
any Subsidiary is in conflict with, or in default, breach or
violation of, (i) any Law applicable to such entity or by
which any property or asset of such entity is bound or affected,
or (ii) any contract or Company Permit to which such entity
is a party or by which such entity or any property or asset of
such entity is bound, except, with respect to clauses (i)
and (ii), for any such conflicts, defaults, breaches or
violations that would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse
Effect. Without limiting the generality of the foregoing,
(x) each Company Healthcare Facility is in compliance with
the requirements of and conditions for participating in the
Government Programs such facility participates in as of the date
of this Agreement and (y) all claims for payment or cost
reports filed or required to be filed by each Company Healthcare
Facility under any Government Program or any private payor
program have been prepared and filed in accordance with all
applicable Laws, except, in the case of clauses (x) and
(y), for any such noncompliance that would not, individually or
in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
Section
3.07
SEC
Filings; Financial Statements; Undisclosed
Liabilities
.
(a) The Company has filed all forms, reports, statements,
schedules and other documents required to be filed by it with
the SEC since January 1, 2009 (collectively, the
SEC Reports
). The SEC Reports (i) were
prepared, in all material respects, in accordance with the
applicable requirements of the Securities Act of 1933, as
amended (the
Securities Act
), the Exchange
Act, and, in each case, the rules and regulations promulgated
thereunder, and (ii) did not, at the time they were filed,
or, if amended, as of the date of such amendment, contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make
the statements made therein, in the light of the circumstances
under which they were made, not misleading.
(b) Each of the consolidated financial statements
(including, in each case, any notes thereto) contained in the
SEC Reports was prepared in accordance with United States
generally accepted accounting principles
(
GAAP
) applied on a consistent basis
throughout the periods indicated (except as may be indicated in
the notes thereto or, in the case of unaudited statements, as
permitted by
Form 10-Q
of the SEC) and each fairly presents, in all material respects,
the consolidated financial position, results of operations and
cash flows of the Company and its consolidated Subsidiaries as
at the respective dates thereof and for the respective periods
indicated therein, except as otherwise noted therein (subject,
in the case of unaudited statements, to the absence of notes and
normal and recurring year-end adjustments).
(c) Except as would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse
Effect, the management of the Company (i) has implemented
and maintains disclosure controls and procedures (as defined in
Rule 13a-15(e)
of the Exchange Act) to ensure that material information
relating to the Company, including its consolidated
Subsidiaries, is in all material respects made known to the
principal executive officer and the principal financial and
accounting officer of the Company by others within those
entities, and (ii) has disclosed, based on its most recent
evaluation prior to the date of this Agreement, to the
Companys outside auditors and the audit committee of the
Company Board (x) any significant deficiencies and material
weaknesses in the design or operation of internal controls over
financial reporting (as defined in
Rule 13a-15(f)
of the Exchange Act) which are reasonably likely to adversely
affect the Companys ability to record, process, summarize
and report financial information, and (y) any material
fraud, within the knowledge of the Company, that involves
management or other employees who have a significant role in the
Companys internal controls over financial reporting.
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(d) Neither the Company nor any Subsidiary of the Company
has any material liability or obligation of a nature required to
be reflected on a balance sheet prepared in accordance with
GAAP, except for material liabilities and obligations
(i) reflected or reserved against on the consolidated
balance sheet of the Company and the consolidated Subsidiaries
as at December 31, 2009 (including the notes thereto)
included in the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009, or subsequent
SEC Reports, (ii) incurred in connection with the
Transactions, or (iii) incurred in the ordinary course of
business since December 31, 2009 that would not,
individually or in the aggregate, reasonably be expected to have
a Company Material Adverse Effect.
Section
3.08
Information
Supplied
.
None of the information included or
incorporated by reference in the Proxy Statement will, at the
date it is filed with the SEC or first mailed to the
Companys stockholders or at the time of the Company
Stockholders Meeting or at the time of any amendment or
supplement thereof, contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not
misleading, except that no representation is made by the Company
with respect to statements made or incorporated by reference
therein based on information supplied by Parent or Merger Sub in
connection with the preparation of the Proxy Statement for
inclusion or incorporation by reference therein. The Proxy
Statement will comply as to form in all material respects with
the requirements of the Exchange Act and the rules and
regulations promulgated thereunder.
Section
3.09
Absence
of Certain Changes or Events
.
Since
December 31, 2009, (a) there has not been any event,
circumstance, state of facts, change or effect that,
individually or in the aggregate, has had or would reasonably be
expected to have a Company Material Adverse Effect (without any
regard to the Company Disclosure Schedule or any disclosures in
the SEC Reports), (b) except in connection with the
Transactions, the Company and its Subsidiaries have conducted
their businesses in the ordinary course of business and
(c) none of the Company or any of its Subsidiaries has
taken any action that, if taken after the date of this
Agreement, would constitute a breach of the covenants set forth
in Sections 5.01(d), (f), (j) or (l) (only with regard
to the foregoing subsections of Sections 5.01).
Section
3.10
Absence
of Litigation
.
There is no litigation, suit,
action or proceeding before any Governmental Authority (an
Action
) pending or, to the knowledge of the
Company, threatened in writing against the Company or any of its
Subsidiaries, or any property or asset of the Company or any of
its Subsidiaries that, individually or in the aggregate, would
reasonably be expected to have a Company Material Adverse
Effect. Neither the Company nor any Subsidiary of the Company
nor any property or asset of the Company or any Subsidiary of
the Company is subject to any continuing order of, consent
decree, settlement agreement or other similar written agreement
with, any Governmental Authority, or any order, judgment,
injunction or decree of any Governmental Authority that would,
individually or in the aggregate, reasonably be expected to have
a Company Material Adverse Effect.
Section
3.11
Employee
Benefit Plans
.
(a) Section 3.11(a)
of the Company Disclosure Schedule lists all employee benefit
plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended
(
ERISA
)) and all bonus, stock option, stock
purchase, restricted stock, incentive, deferred compensation,
retiree medical or life insurance, supplemental retirement,
severance, change in control, retention or termination or other
material benefit plans, programs, policies or arrangements, and
all bonus, incentive, deferred compensation, equity or
equity-based compensation, employment, termination, severance,
change in control, retention or other material contracts or
agreements to which the Company, any Subsidiary of the Company
or Company Controlled Entity (as defined below) is a party, with
respect to which the Company, any Subsidiary of the Company or
any Company Controlled Entity has any obligation or which are
maintained, contributed to or sponsored by the Company, any
Subsidiary of the Company or any Company Controlled Entity for
the benefit of any current or former employee, consultant,
officer or director of the Company or any Subsidiary
(collectively, the
Plans
). For purposes
hereof,
Company Controlled Entity
means any
person or entity, other than the Company and its Subsidiaries,
that, together with the Company, is treated as a single employer
under Section 414 of the Code. There are no other employee
benefit plans, programs, arrangements or agreements, whether
formal or informal, whether in writing or not, to which the
Company or any Subsidiary is a party, with respect to which the
Company or any Subsidiary has any
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obligation or which are maintained, contributed to or sponsored
by the Company or any Subsidiary for the benefit of any current
or former employee, officer or director of the Company or any
Subsidiary.
(b) With respect to each material Plan, the Company has
made available to Parent complete and accurate copies, as
applicable, of (A) such Plan, including any material
amendment thereto, (B) each trust, insurance, annuity or
other funding contract related thereto, (C) the most recent
audited financial statements and actuarial or other valuation
reports prepared with respect thereto and (D) the two most
recent annual reports on Form 5500 required to be filed
with the IRS with respect thereto.
(c) Each Plan that is intended to be qualified under
Section 401(a) of the Code has received a favorable
determination letter or prototype opinion letter from the
Internal Revenue Service of the United States (the
IRS
) that the Plan is so qualified, or an
application for such a letter is currently being processed by
the IRS, and, to the knowledge of the Company, no circumstance
exists that could reasonably be expected to adversely affect the
qualified status of any Plan.
(d) Each Plan has been established and administered in
accordance with its terms, and in compliance with the applicable
provisions of ERISA, the Code and other applicable Laws, except
to the extent such noncompliance would not, individually or in
the aggregate, reasonably be expected to have a Company Material
Adverse Effect, and no Plan provides retiree welfare benefits,
and neither the Company nor any Subsidiary has any obligation to
provide any retiree welfare benefits other than as required by
Section 4980B of the Code.
(e) With respect to any Plan, as of the date of this
Agreement (i) no Actions (other than routine claims for
benefits in the ordinary course) are pending or, to the
knowledge of the Company, threatened in writing, that would,
individually or in the aggregate, reasonably be expected to have
a Company Material Adverse Effect and (ii) no
administrative investigation, audit or other administrative
proceeding by the Department of Labor, the IRS or other
Governmental Authority is pending, in progress or, to the
knowledge of the Company, threatened in writing that would,
individually or in the aggregate, reasonably be expected to have
a Company Material Adverse Effect.
(f) Neither the Company, any Subsidiary of the Company nor
any Company Controlled Entity has sponsored, maintained,
contributed to or been required to maintain or contribute to, or
has any actual or contingent liability under, any Plan that is
subject to Section 302 or Title IV of ERISA or
Section 412 of the Code or is otherwise a defined benefit
plan (including any such plan maintained outside the United
States).
(g) None of the execution and delivery of this Agreement,
the performance by any party of its obligations hereunder or the
consummation of the Transactions (alone or in conjunction with
any other event, including any termination of employment on or
following the Effective Time) will (A) entitle any employee
to any material compensation or benefit, (B) accelerate the
time of payment or vesting, or trigger any payment or funding,
of any material compensation or benefit or trigger any other
material obligation under any Plan or (C) result in any
breach or violation of, or default under, or limit the
Companys right to amend, modify or terminate any Plan.
(h) No amount or other entitlement that could be received
as a result of the Transactions (alone or in conjunction with
any other event) by any disqualified individual (as
defined in Section 280G(c) of the Code) with respect to the
Company will constitute an excess parachute payment
(as defined in Section 280G(b)(1) of the Code). No
director, officer, employee or independent contractor of the
Company or any of its Subsidiaries is entitled to receive any
gross-up
or
additional payment by reason of the tax required by
Sections 409A or 4999 of the Code being imposed on such
person.
Section
3.12
Labor
and Employment Matters
.
Neither the Company
nor any Subsidiary is a party to any collective bargaining
agreement or other labor union contract applicable to persons
employed by the Company or any of its Subsidiaries, nor, to the
knowledge of the Company, are there any activities or
proceedings of any labor union to organize any such employees.
To the knowledge of the Company, as of the date of this
Agreement, there are no unfair labor practice complaints pending
against the Company or any of its Subsidiaries before the
National Labor Relations Board or any other Governmental
Authority or any current union representation questions
involving employees of the Company or any of its Subsidiaries.
As of the date
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of this Agreement, there is no strike, work stoppage or lockout
pending, or, to the knowledge of the Company, threatened in
writing, by or with respect to any employees of the Company or
any of its Subsidiaries.
Section
3.13
Real
Property
.
Section 3.13 of the Company
Disclosure Schedule sets forth a list of all real property owned
by each of the Company and its Subsidiaries (the
Owned
Real Property
) and all leasehold interests in real
property leased, subleased, licensed or with respect to which a
right to use or occupy has been granted to the Company or its
Subsidiaries for which annual rent exceeds $50,000 (the
Real Property Leases
). Each of the Company or
its Subsidiaries has sole and exclusive, good and clear, record
and marketable title to all Owned Real Property, or, in the case
of leased real property held under Real Property Leases, an
enforceable leasehold interest in, or right to use, all such
leased real property, subject only to Permitted Liens.
Section
3.14
Taxes
.
(a) The
Company and its Subsidiaries have timely filed or caused to be
filed or will timely file or cause to be timely filed (taking
into account any extension of time to file granted or obtained)
all material Tax Returns required to be filed by them and all
such material Tax Returns are complete and accurate in all
material respects. The Company and its Subsidiaries have timely
paid or will timely pay all amounts of Taxes shown as due and
payable on such Tax Returns by the Company and its Subsidiaries
except to the extent that such Taxes are being contested in good
faith and for which the Company or the appropriate Subsidiary
has set aside adequate reserves in accordance with GAAP. All
material amounts of Taxes required to have been withheld by or
with respect to the Company and the Subsidiaries have been or
will be timely withheld and remitted to the applicable taxing
authority.
(b) The Company has made available to Parent copies of all
federal income Tax Returns filed, and any associated examination
reports and statements of deficiencies assessed against or
agreed to with respect to such Tax Returns, by the Company or
any of its Subsidiaries for all taxable years beginning on or
after January 1, 2006. To the knowledge of the Company, the
federal income Tax Returns of the Company and each of its
Subsidiaries have been audited by the IRS or are closed by the
applicable statute of limitations for all taxable years through
December 31, 2005. There are no pending or, to the
knowledge of the Company, threatened in writing audits,
examinations, investigations or other proceedings in respect of
any material Tax of the Company or any of its Subsidiaries. No
deficiency for any material amount of Tax has been asserted or
assessed by any taxing authority in writing against the Company
or any of its Subsidiaries, which deficiency has not been
satisfied by payment, settled or been withdrawn or contested in
good faith.
(c) Neither the Company nor any Subsidiary of the Company
has waived any statute of limitations in respect of any material
Tax or agreed to any extension of time with respect to a Tax
assessment or deficiency (other than pursuant to extensions of
time to file Tax Returns obtained in the ordinary course of
business).
(d) To the knowledge of the Company, no claim is pending by
a taxing authority in a jurisdiction where the Company or any of
its Subsidiaries does not file a Tax Return that the Company or
such Subsidiary is or may be subject to Tax by such jurisdiction.
(e) Neither the Company nor any Subsidiary of the Company
will be required to include any item of income in, or exclude
any item of deduction from, taxable income for a taxable period
beginning after the Closing as a result of any
(1) adjustment pursuant to Section 481 of the Code,
the regulations thereunder or any similar provision under state
or local Law, for a taxable period ending on or before the
Closing, (2) closing agreement as described in
Section 7121 of the Code (or any corresponding or similar
provision of state, local or foreign income Tax Law) executed on
or prior to the Closing, or (3) installment sale or open
transaction disposition made on or prior to the Closing.
(f) The Company has not been a controlled
corporation or a distributing corporation in
any distribution occurring during a three-year period ending on
the date hereof that was purported or intended to qualify for
tax-free treatment pursuant to Section 355(a) of the Code.
(g) Neither the Company nor any Subsidiary of the Company
(A) is a party to or is bound by any material tax sharing,
indemnification or allocation agreement with persons other than
wholly owned Subsidiaries of the Company or (B) has any
liability for taxes of any person pursuant to Treasury
Regulation Section 1.1502-6
(or any similar provision of state, local or foreign Law), as a
transferee or
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successor, by contract or otherwise (other than agreements among
the Company and its Subsidiaries and other than customary Tax
indemnifications contained in credit or other commercial
agreements the primary purposes of which agreements do not
relate to Taxes).
(h) Neither the Company nor any Subsidiary of the Company
has participated in any listed transactions within
the meaning of Treasury
Regulation Section 1.6011-4(b)(2).
(i) For purposes of this Agreement:
(i)
Tax
or
Taxes
shall mean any and all federal,
state, local and foreign income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties,
capital stock, franchise, profits, withholding, social security,
unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other similar taxes (together with
any and all interest, penalties and additions to tax imposed
with respect thereto) imposed by any governmental or Tax
authority.
(ii)
Tax Returns
means any and
all returns, declarations, claims for refund, or information
returns or statements, reports and forms relating to Taxes filed
with any Tax authority (including any schedule or attachment
thereto) with respect to the Company or its Subsidiaries,
including any amendment thereof.
Section
3.15
Material
Contracts
.
The Company has filed with the SEC
copies of all material contracts that were required to be filed
with the SEC during the three-year period ending on the date
hereof (such filed contracts being
Material
Contracts
). Except as would not, individually or in
the aggregate, reasonably be expected to have a Company Material
Adverse Effect, (a) none of the Company or any of its
Subsidiaries has received any written claim of material default
under or cancellation of any Material Contract and none of the
Company or any such Subsidiary is in material breach or material
violation of, or material default under, any Material Contract
and (b) to the Companys knowledge, no other party is
in material breach or material violation of, or material default
under, any Material Contract.
Section
3.16
Insurance
.
Section 3.16
of the Company Disclosure Schedule sets forth a complete and
correct list of all material insurance policies owned or held by
the Company and each of its Subsidiaries, true and complete
copies of which have been made available to Parent. With respect
to each such insurance policy: (i) each policy with respect
to the Company and its Subsidiaries is legal, valid, binding and
enforceable in accordance with its terms and, except for
policies that have expired under their terms in the ordinary
course, is in full force and effect; (ii) neither the
Company nor any Subsidiary of the Company is in material breach
or default (including any such breach or default with respect to
the payment of premiums or the giving of notice), and, to the
Companys knowledge, no event has occurred which, with
notice or the lapse of time, would constitute such a breach or
default, or permit termination or modification, under any such
policy; and (iii) no notice of cancellation or termination
has been received.
Section
3.17
Environmental
Matters
.
Except, in the case of
clauses (a) through (e) below, as would not,
individually or in the aggregate, reasonably be expected to have
a Company Material Adverse Effect: (a) the Company and each
Subsidiary of the Company is and has been in compliance with all
applicable Laws relating to the protection of human health and
the environment or to occupational health and safety
(
Environmental Laws
); (b) the Company
and its Subsidiaries possess all permits and approvals issued
pursuant to any Environmental Law that are required to conduct
the business of the Company and its Subsidiaries as it is
currently conducted, and are and have been in compliance with
all such permits and approvals; (c) to the knowledge of the
Company, no releases of (i) any petroleum products or
byproducts, radioactive materials, friable asbestos or
polychlorinated biphenyls or (ii) any waste, material or
substance defined as a hazardous substance,
hazardous material, hazardous waste,
pollutant or any analogous terminology under any
applicable Environmental Law have occurred at, on, from or under
any real property currently or formerly owned, operated or
occupied by the Company or any of its Subsidiaries, for which
releases the Company or any such Subsidiary may have incurred
liability under any Environmental Law; (d) neither the
Company nor any Subsidiary of the Company has received any
written claim or notice from any Governmental Authority alleging
that the Company or any such Subsidiary is or may be in
violation of, or
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has any liability under, any Environmental Law, and
(e) neither the Company nor any Subsidiary of the Company
has entered into any agreement or is subject to any legal
requirement that may require it to pay for, guarantee, defend or
indemnify or hold harmless any person from or against any
liabilities arising under Environmental Laws.
Section
3.18
Board
Approval; Vote Required
.
(a) The Company
Board, by resolutions duly adopted at a meeting duly called and
held, has as of the date of this Agreement duly
(i) determined that this Agreement and the Merger are fair
to and in the best interests of the Companys stockholders,
(ii) approved this Agreement and declared its advisability,
and (iii) recommended that the stockholders of the Company
adopt this Agreement and directed that this Agreement be
submitted for consideration by the Companys stockholders
at the Company Stockholders Meeting (collectively, the
Company Board Recommendation
). The approval
by the Company Board of this Agreement and the Merger represents
all the action necessary to render inapplicable to this
Agreement and the Merger the provisions of Section 203 of
the DGCL to the extent, if any, such Section would otherwise be
applicable to this Agreement and the Merger, and, to the
knowledge of the Company, no other state takeover statute
applies to this Agreement or the Merger.
(b) The only vote of the holders of any class or series of
capital stock of the Company necessary to adopt this Agreement
is the adoption of this Agreement by holders of a majority of
the outstanding shares of Company Common Stock entitled to vote
thereon (the
Stockholder Approval
).
Section
3.19
Opinion
of Financial Advisor
.
The Special Committee
has received the opinion of Goldman Sachs & Co. to the
effect that, as of the date of this Agreement, the Merger
Consideration to be received by the holders of Shares is fair,
from a financial point of view, to such holders.
Section
3.20
Brokers
.
No
broker, finder or investment banker (other than Goldman
Sachs & Co.) is entitled to any brokerage,
finders or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of the
Company.
ARTICLE IV
REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent
and warrant to the Company that:
Section
4.01
Corporate
Organization
.
Each of Parent and Merger Sub
is a corporation, in each case, duly organized, validly existing
and in good standing under the Laws of the jurisdiction of its
organization and has the requisite power and authority to own,
lease and operate its properties and to carry on its business as
it is now being conducted, except where the failure to be so
organized, validly existing or in good standing or to have such
power and authority would not, individually or in the aggregate,
prevent or materially delay consummation of any of the
Transactions or otherwise prevent or materially delay Parent or
Merger Sub from performing its obligations under this Agreement.
Section
4.02
Certificate
of Incorporation and By-Laws
.
Parent has
heretofore furnished to the Company a complete and correct copy
of the Certificate of Incorporation and By-Laws of Merger Sub,
each as amended to date. Such Certificates of Incorporation and
By-Laws are in full force and effect. Parent is not in violation
of any of the provisions of its Certificate of Incorporation or
By-Laws except for any such violations which would not prevent
or materially delay consummation of any of the Transactions or
otherwise prevent or materially delay Parent from performing its
obligations under this Agreement, and Merger Sub is not in
violation of any of the provisions of its Certificate of
Incorporation or By-Laws.
Section
4.03
Authority
Relative to This Agreement
.
Each of Parent
and Merger Sub has all necessary corporate power and authority
to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the Transactions. The
execution, delivery and performance of this Agreement by Parent
and Merger Sub and the consummation by Parent and Merger Sub of
the Transactions have been duly and validly authorized by all
necessary corporate action, and no other corporate proceedings
on the part of Parent or Merger Sub are necessary to authorize
this Agreement or to consummate the Transactions. This Agreement
has been duly and validly executed and delivered by Parent and
Merger Sub and, assuming due authorization,
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execution and delivery by the Company, constitutes a legal,
valid and binding obligation of each of Parent and Merger Sub,
enforceable against each of Parent and Merger Sub in accordance
with its terms, subject to the effect of any applicable
bankruptcy, insolvency (including all Laws relating to
fraudulent transfers), reorganization, moratorium or similar
Laws affecting creditors rights generally and subject to
the effect of general principles of equity (regardless of
whether considered in a proceeding at law or in equity).
Section
4.04
No
Conflict; Required Filings and Consents;
Agreements
.
(a) The execution and
delivery of this Agreement by Parent and Merger Sub do not, and
the performance of this Agreement by Parent and Merger Sub and
the consummation by Parent and Merger Sub of the Transactions
will not, (i) conflict with or violate the Certificate of
Incorporation or By-Laws of Parent or Merger Sub,
(ii) assuming that all consents, approvals and other
authorizations described in Section 4.04(b) have been
obtained and that all filings and other actions described in
Section 4.04(b) have been made or taken, conflict with or
violate any Law applicable to Parent or Merger Sub or by which
any property or asset of either of them is bound or affected, or
(iii) result in any breach or violation of, or constitute a
default (or an event which, with notice or lapse of time or
both, would become a default) under, or give to others any right
of termination, amendment, acceleration or cancellation of, or
result in the creation of a Lien on any property or asset of
Parent or Merger Sub pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Parent or
Merger Sub is a party or by which Parent or Merger Sub or any
property or asset of either of them is bound or affected,
except, with respect to clauses (ii) and (iii), for any
such conflicts, violations, breaches, defaults or other
occurrences which would not prevent or materially delay
consummation of any of the Transactions or otherwise prevent or
materially delay Parent and Merger Sub from performing their
obligations under this Agreement.
(b) The execution and delivery of this Agreement by Parent
and Merger Sub do not, and the performance of this Agreement by
Parent and Merger Sub and the consummation by Parent and Merger
Sub of the Transactions will not, require any consent, approval,
authorization or permit of, or filing with or notification to,
any Governmental Authority, except for (i) applicable
requirements, if any, of the Exchange Act, (ii) the filing
and recordation of appropriate merger documents as required by
the DGCL and appropriate documents with the relevant authorities
of other states in which the Company or any of its Subsidiaries
is qualified to do business, (iii) the premerger
notification and waiting period requirements of the HSR Act;
(iv) applicable requirements, if any, of Health Care Laws;
(v) applicable requirements, if any, of any Government
Program in which the Company or any of its Subsidiaries
participates; and (vi) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or materially delay
consummation of any of the Transactions or otherwise prevent or
materially delay Parent or Merger Sub from performing their
obligations under this Agreement.
Section
4.05
Information
Supplied
.
None of the information supplied by
Parent or Merger Sub for inclusion in the Proxy Statement will,
at the date it is filed with the SEC or first mailed to the
Companys stockholders or at the time of the Company
Stockholders Meeting or at the time of any amendment or
supplement thereof, contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not
misleading.
Section
4.06
Absence
of Litigation
.
As of the date of this
Agreement, there is no Action pending or, to the knowledge of
the officers of Parent, threatened in writing, against Parent or
any of its affiliates before any Governmental Authority that
would or seeks to prevent or materially delay the consummation
of any of the Transactions or otherwise prevent or materially
delay Parent or Merger Sub from performing their obligations
hereunder. Neither Parent nor any of its affiliates is subject
to any continuing order of, consent decree, settlement agreement
or other similar written agreement with, any Governmental
Authority, or any order, judgment, injunction or decree of any
Governmental Authority that would or seeks to prevent or
materially delay the consummation of any of the Transactions or
otherwise prevent or materially delay Parent or Merger Sub from
performing their obligations hereunder.
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Section
4.07
Operations
of Merger Sub
.
Merger Sub is a direct, wholly
owned Subsidiary of Parent, was formed solely for the purpose of
engaging in the Transactions, has engaged in no other business
activities and has conducted its operations only as contemplated
by this Agreement.
Section
4.08
Financing
.
Parent
has delivered to the Company true and complete copies of an
executed commitment letter, including excerpts of those portions
of each fee letter and engagement letter associated therewith
that contain any conditions to funding or flex
provisions or other substantive provisions (excluding only those
provisions related solely to fees and economic terms agreed to
by the parties) regarding the terms and conditions of the
financing to be provided thereby (together, the
Commitment Letter
), pursuant to which
JPMorgan Chase Bank, N.A. has committed to provide Parent and
Merger Sub with financing in an aggregate amount of
$4,150.0 million. The Commitment Letter, in the form so
delivered, is in full force and effect and is a legal, valid and
binding obligation of Parent and, to the knowledge of Parent as
of the date of this Agreement, the other parties thereto. No
event has occurred which, with or without notice, lapse of time
or both, would constitute a default or breach on the part of
Parent under the Commitment Letter. Parent has fully paid any
and all commitment fees or other fees required by the Commitment
Letter to be paid as of the date hereof. Parent shall have at
the Closing and at the Effective Time immediately available
funds in an amount sufficient to consummate the Transactions
upon the terms contemplated by this Agreement and to pay all
related fees and expenses associated therewith. The financing
contemplated by the Commitment Letter is subject to no
contingency or conditions other than those set forth in the
copies of the Commitment Letter delivered to the Company. As of
the date of this Agreement, Parent has no reason to believe that
any of the conditions to the financing contemplated by the
Commitment Letter will not be satisfied or that such financing
will not be available to Merger Sub on the date of the Closing.
For the avoidance of doubt, it shall not be a condition to
Closing for Parent to obtain any financing.
Section
4.09
Brokers
.
The
Company will not be responsible for any brokerage, finders
or other fee or commission to any broker, finder or investment
banker in connection with the Transactions based upon
arrangements made by or on behalf of Parent or Merger Sub.
ARTICLE V
CONDUCT OF
BUSINESS PENDING THE MERGER
Section
5.01
Conduct
of Business by the Company Pending the
Merger
.
The Company agrees that, between the
date of this Agreement and the Effective Time, except as
contemplated by this Agreement or as set forth in
Section 5.01 of the Company Disclosure Schedule, the
businesses of the Company and its Subsidiaries shall be
conducted in the ordinary course of business and the Company
shall use its reasonable best efforts to preserve substantially
intact the business organization of the Company and its
Subsidiaries and to preserve substantially intact the current
relationships of the Company and its Subsidiaries with any
persons with which the Company or any such Subsidiary has
material business relations. Except as expressly contemplated by
any other provision of this Agreement or as set forth in
Section 5.01 of the Company Disclosure Schedule, neither
the Company nor any of its Subsidiaries shall, between the date
of this Agreement and the Effective Time, do any of the
following without the prior written consent of Parent, which
consent shall not be unreasonably withheld or delayed:
(a) amend or otherwise change its Amended and Restated
Certificate of Incorporation, By-Laws or other similar
organizational documents, or authorize or adopt (or publicly
propose) a plan of complete or partial liquidation or
dissolution of the Company;
(b) (i) issue, grant, sell, dispose of, deliver,
encumber (other than Permitted Liens), or authorize any such
issuance, grant, sale, disposition, delivery or encumbrance of,
any shares of any class of capital stock of the Company or any
of its Subsidiaries, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of
such capital stock, or any other ownership interest, of the
Company or any of its Subsidiaries (except for the issuance of
Shares issuable pursuant to employee stock options or restricted
stock units, in each case, outstanding on the date of this
Agreement and in accordance with their present terms) or
(ii) sell, dispose of, transfer, abandon, lease, license or
otherwise
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encumber (other than Permitted Liens), or authorize any such
sale, disposition, transfer, abandonment, lease, license or
encumbrance of, any properties, rights or assets of the Company
or any of its Subsidiaries that are material to the Company and
its Subsidiaries, taken as a whole;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise,
with respect to any of its capital stock, except for dividends
or other distributions to the Company or any other direct or
indirect wholly owned Subsidiary of the Company by any direct or
indirect wholly owned Subsidiary of the Company;
(d) reclassify, combine, split, subdivide or redeem, or
purchase or otherwise acquire, directly or indirectly, any
capital stock of the Company or any of its Subsidiaries (or any
rights, warrants or options to acquire any such capital stock);
(e) (i) acquire (including by purchase, merger,
consolidation, or acquisition of stock or assets or any other
business combination) any corporation, partnership or other
business organization (or any division or business thereof);
(ii) except among the Company and any of its wholly owned
Subsidiaries and except for borrowings under existing credit
facilities in the ordinary course of business, incur any
indebtedness for borrowed money or issue any debt securities or
calls, options, warrants or other rights to acquire debt
securities or assume, guarantee or endorse, or otherwise become
responsible for, the obligations of any person;
(iii) except among the Company and any of its wholly owned
Subsidiaries and as required in accordance with its terms,
redeem, purchase, prepay, defease or cancel any indebtedness for
borrowed money; (iv) except with respect to the Company or
any of its wholly owned Subsidiaries, make any loans, advances,
investments or capital contributions in any material amount in
or to any person; (v) enter into, terminate, amend or fail
to renew any contract material to the Company and its
Subsidiaries, taken as a whole, or waive, release or assign any
material rights or claims thereunder; or (vi) authorize, or
make any commitment with respect to, capital expenditures that,
individually or taken together, exceed by 10% the aggregate
amount of the annual capital expenditures budget of the Company
and its Subsidiaries, taken as a whole (a copy of which has been
previously provided to Parent);
(f) (i) increase the compensation payable or to become
payable or the benefits provided to its current or former
directors, officers or employees, except with respect to
officers or employees below the level of facility executive
officer or with respect to other officers or employees whose
annual compensation after such increase does not exceed
$100,000, in each case in the ordinary course of business
consistent with past practice; (ii) grant any retention,
severance, change in control, or termination pay to, or enter
into any employment, bonus, change of control or severance
agreement with, any current or former director, officer or other
employee of the Company or of any Subsidiary of the Company;
(iii) establish, adopt, enter into, terminate or amend any
Plan, or establish, adopt or enter into any plan, agreement,
program, policy, trust, fund or other arrangement that would be
a Plan or collective bargaining agreement if it were in
existence as of the date of this Agreement, for the benefit of
any director, officer or employee except as required by Law;
(iv) loan or advance any money or other property to any
current or former director, officer or employee of the Company
or any of its Subsidiaries; or (v) take any action to
accelerate the time of vesting or payment of (or fund or
otherwise secure) any compensation or benefits under any Plan,
except, in the case of the matters described in
clauses (ii) and (iii), the entering into, or making
available to, newly hired employees and promoted employees, in
each case, who are not directors or executive officers (and who
will not be directors or executive officers after such
promotion), plans, agreements, benefits and compensation
arrangements (including grants under the Company Stock Plan) in
the ordinary course of business consistent with past practice;
(g) other than in the ordinary course of business or except
as required by applicable Law, make, change or rescind any
material Tax election, file any amended material Tax Return,
enter into any closing agreement relating to Taxes, waive or
extend the statute of limitations in respect of material Taxes
(other than pursuant to extensions of time to file Tax Returns
obtained in the ordinary course of business) or settle or
compromise any material income Tax liability or other Tax
liability in excess of $1.0 million in the aggregate;
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(h) fail to maintain in full force and effect the existing
insurance policies (or alternative policies with comparable
terms and conditions) covering the Company and its Subsidiaries
and its and their respective properties, assets and businesses;
(i) pay, discharge or settle (x) any Action other than
payments, discharges and settlements involving not more than
$1.0 million in the aggregate (net of insurance proceeds,
including any such proceeds from PSI Surety, Inc.) and that do
not require any actions or impose any material restrictions on
the business or operations of the Company and its Subsidiaries,
taken as a whole, or (y) any Action involving any holder or
group of holders of Shares;
(j) except as required by GAAP or Law, make any change in
financial accounting methods, principles or practices materially
affecting the reported consolidated assets, liabilities or
results of operations of the Company;
(k) (i) effect or permit a plant closing
or mass layoff as those terms are defined in the
Workers Adjustment and Retraining Notification Act without
complying with the notice requirements and all other provisions
of such act or (ii) except as required by Law, enter into
or modify or amend in any material respect or terminate any
collective bargaining agreement with any labor union other than
pursuant to customary negotiations in the ordinary course of
business; or
(l) announce an intention, enter into any formal or
informal agreement or otherwise make a commitment, to do any of
the foregoing.
Section
5.02
Conduct
of Business by Parent and Merger Sub Pending the
Merger
.
Each of Parent and Merger Sub agrees
that, between the date of this Agreement and the Effective Time,
it shall not, directly or indirectly, take any action or fail to
take any action that is intended to, or that would reasonably be
likely to, materially delay or prevent the consummation of the
Transactions.
ARTICLE VI
ADDITIONAL
AGREEMENTS
Section
6.01
Proxy
Statement; Company Stockholders
Meeting
.
(a) As promptly as reasonably
practicable following the date of this Agreement, the Company
shall prepare and file with the SEC the preliminary Proxy
Statement. Each of the Company and Parent shall furnish all
information concerning itself and its affiliates that is
required to be included in the Proxy Statement or that is
customarily included in proxy statements prepared in connection
with transactions of the type contemplated by this Agreement.
Each of the Company and Parent shall use its reasonable best
efforts to respond as promptly as reasonably practicable to any
comments of the SEC with respect to the Proxy Statement, and the
Company shall use its reasonable best efforts to cause the
definitive Proxy Statement to be mailed to the Companys
stockholders as promptly as reasonably practicable after the
date on which the Proxy Statement is cleared by the SEC. The
Company shall promptly notify Parent upon the receipt of any
comments from the SEC or its staff or any request from the SEC
or its staff for amendments or supplements to the Proxy
Statement. If, at any time prior to the Company
Stockholders Meeting, any information relating to the
Company, Parent or any of their respective affiliates, officers
or directors should be discovered by the Company or Parent which
should be set forth in an amendment or supplement to the Proxy
Statement, so that the Proxy Statement shall not contain any
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they are made, not misleading, the
party which discovers such information shall promptly notify the
other parties, and an appropriate amendment or supplement
describing such information shall be filed with the SEC and, to
the extent required by applicable Law, disseminated to the
stockholders of the Company.
(b) The Company shall establish a record date for, duly
call, give notice of, convene and hold a meeting of its
stockholders (the
Company Stockholders
Meeting
), for the purpose of obtaining the Stockholder
Approval, and, if there is present at such Company
Stockholders Meeting, in person or by proxy, sufficient
favorable voting power to secure the vote of the stockholders of
the Company necessary to satisfy the
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condition set forth in Section 7.01(a), shall not postpone
or adjourn such meeting except to the extent required by Law.
Subject to Section 6.03(b), the Company Board shall
(i) recommend to holders of the Shares that they adopt this
Agreement, (ii) include such recommendation in the Proxy
Statement and (iii) use its reasonable best efforts to
solicit and obtain the Stockholder Approval. For clarity, the
Company acknowledges that its obligations pursuant to the first
sentence of this Section 6.01(b) shall not be affected by
the commencement, public proposal, public disclosure or
communication to the Company of any Acquisition Proposal.
Section
6.02
Access
to Information;
Confidentiality
.
(a) Except as otherwise
prohibited by applicable Law or the terms of any contract
entered into prior to the date hereof or as would be reasonably
expected to violate any attorney-client privilege, from the date
of this Agreement until the Effective Time, the Company shall
(and shall cause its Subsidiaries to), at Parents expense:
(i) provide to Parent and to the officers, directors,
employees, accountants, consultants, legal counsel, financing
sources, agents and other representatives (collectively, with
respect to any person, its
Representatives
)
of Parent reasonable access, during normal business hours and
upon reasonable prior notice to the Company by Parent, to the
officers, employees, agents, properties, offices and other
facilities of the Company and its Subsidiaries and to the books
and records thereof, and (ii) furnish as promptly as
practicable to Parent such information concerning the business,
properties, Contracts, assets, liabilities, personnel and other
aspects of the Company and its Subsidiaries as Parent or its
Representatives may reasonably request.
(b) All information obtained by Parent, Merger Sub or its
or their Representatives pursuant to this Section 6.02
shall be kept confidential in accordance with the
confidentiality agreement, dated April 18, 2010 (the
Confidentiality Agreement
), between Parent
and the Company.
(c) No investigation pursuant to this Section 6.02
shall affect any representation or warranty in this Agreement of
any party hereto or any condition to the obligations of the
parties hereto.
Section
6.03
Solicitation
.
(a) Except
as permitted by this Section 6.03, from the date of this
Agreement until the Effective Time or, if earlier, the
termination of the Agreement in accordance with
Article VIII, the Company agrees that neither it nor any of
its Subsidiaries shall, nor shall it authorize or permit its
Subsidiaries and Representatives to, directly or indirectly,
(i) solicit, initiate or knowingly encourage any inquiries
or the implementation or submission of any Acquisition Proposal,
or (ii) participate in discussions or negotiations
regarding, or furnish to any person any non-public information
in connection with, any Acquisition Proposal except to notify
such person of the existence of this Section 6.03(a)
(including, in each case, with respect to any person that has
previously been invited into a process to make, or participate
in any discussions regarding, an Acquisition Proposal);
provided
,
however
, that, prior to the adoption of
this Agreement by the Companys stockholders at the Company
Stockholders Meeting, nothing contained in this Agreement
shall prevent the Company or the Company Board (acting through
the Special Committee or otherwise) from furnishing information
to, or engaging in negotiations or discussions with, any person
that shall have submitted after the date hereof a written
Acquisition Proposal that is not a result of a breach of this
Section 6.03(a), if prior to taking such action
(A) the Company Board (acting through the Special Committee
or otherwise) determines in good faith (after consultation with
its advisors) that such Acquisition Proposal is, or could
reasonably be expected to result in, a Superior Proposal, and
the Company Board (acting through the Special Committee or
otherwise) determines in good faith (after consultation with its
outside legal counsel) that its failure to take such actions
would be inconsistent with its fiduciary duties under applicable
Law, and (B) the Company receives from such person an
executed confidentiality agreement with terms no less favorable
with regard to confidentiality than the Confidentiality
Agreement. The Company shall provide to Parent, in accordance
with the terms of the Confidentiality Agreement and on a prompt
basis, any material non-public information concerning the
Company or its Subsidiaries provided to such person which was
not previously provided to Parent. The Company shall as promptly
as practicable (and in any event within two business days)
notify Parent, in the event that the Company or any of its
Subsidiaries or Representatives receives any Acquisition
Proposal, of the material terms and conditions of any such
Acquisition Proposal and the identity of the person making such
Acquisition Proposal, and the Company shall keep Parent
reasonably informed of any material developments with respect to
any such Acquisition Proposal (including any material changes
thereto). Except as set forth in this Section 6.03, neither
the Company nor any Subsidiary of the Company shall enter into
any Acquisition Agreement.
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(b) Except as set forth in this Section 6.03, the
Company Board (or any committee thereof) shall not, and shall
not publicly propose to: (i) withhold, withdraw or modify,
in a manner adverse to Parent or Merger Sub, the Company Board
Recommendation; (ii) approve or recommend any Acquisition
Proposal; or (iii) approve or recommend, or cause or permit
the Company or any of its Subsidiaries to enter into, any letter
of intent, merger agreement, acquisition agreement or similar
agreement with respect to any Acquisition Proposal, other than a
confidentiality agreement in accordance with
Section 6.03(a) (any such letter or agreement, an
Acquisition Agreement
and the actions
described above in each of clauses (i), (ii) and (iii),
collectively, the
Specified Board Actions
).
Notwithstanding the foregoing, prior to the adoption of this
Agreement by the Companys stockholders at the Company
Stockholders Meeting, (x) in response to the receipt
of a written Acquisition Proposal that is not a result of a
breach of Section 6.03(a), if the Company Board (acting
through the Special Committee or otherwise) (A) determines
in good faith (after consultation with its advisors) that such
Acquisition Proposal is a Superior Proposal and
(B) determines in good faith (after consultation with its
outside legal counsel) that its failure to take such actions
would be inconsistent with its fiduciary duties under applicable
Law, then the Company Board (acting through the Special
Committee or otherwise) may approve and recommend such Superior
Proposal (or any Acquisition Agreement with respect to such
Superior Proposal) and, in connection with the approval or
recommendation of such Superior Proposal, withdraw or modify the
Company Board Recommendation
and/or
cause
the Company to terminate this Agreement (in each case subject to
compliance with Section 8.03) or (y) other than in
connection with an Acquisition Proposal, if the Company Board
(acting through the Special Committee or otherwise) determines
in good faith (after consultation with its outside legal
counsel) that its failure to take such actions would be
inconsistent with its fiduciary duties under applicable Law,
then the Company Board (acting through the Special Committee or
otherwise) may withdraw or modify the Company Board
Recommendation (any action by or on behalf of the Company Board
permitted by the foregoing clause (x) or (y), a
Specified Acquisition Action
);
provided
,
however
, that no Specified Acquisition
Action may be taken until after the fifth business day (or such
subsequent business days as provided for by clause (2) of
this sentence) (the period inclusive of all such days, the
Notice Period
) following Parents
receipt of written notice from the Company advising Parent that
the Company Board intends to take such Specified Acquisition
Action (a
Notice of Adverse Action
) and
specifying the reasons therefor, including, if the basis of the
proposed action by the Company Board is a Superior Proposal, the
material terms and conditions of any such Superior Proposal (it
being understood and agreed that (1) during the Notice
Period the Company shall, and shall cause its financial advisors
and outside legal counsel to, negotiate with Parent in good
faith (to the extent Parent desires to negotiate) and
(2) any amendment to the terms of such Superior Proposal
shall require a new Notice of Adverse Action and a two-business
day extension of the Notice Period then applicable). In
determining whether to take a Specified Acquisition Action, the
Company Board shall take into account any changes to the terms
of this Agreement proposed by Parent to the Company in response
to a Notice of Adverse Action or otherwise.
(c) Nothing contained in this Agreement shall prohibit the
Company from taking and disclosing to its stockholders a
position contemplated by
Rules 14d-9
and
14e-2(a)
promulgated under the Exchange Act or from making any disclosure
to the Companys stockholders if the Company Board (or any
committee thereof) determines in good faith (after consultation
with its outside legal counsel) that it is required to do so
under applicable Law;
provided
,
however
, that
neither the Company nor the Company Board (nor any committee
thereof) shall (i) recommend that the stockholders of the
Company tender their Shares in connection with any such tender
or exchange offer (or otherwise approve or recommend any
Acquisition Proposal) or (ii) withdraw or modify the
Company Board Recommendation, unless in the case of each of
clause (c)(i) and (c)(ii) hereof, the requirements of
Section 6.03(b) shall have been satisfied.
(d) Except as set forth in Section 8.03(d) with
respect to an Acquisition Proposal, for purposes of this
Agreement:
(i)
Acquisition Proposal
means
any bona fide proposal or offer (including any proposal from or
to the Companys stockholders) from any person other than
Parent or Merger Sub relating to (A) any direct or indirect
acquisition of (1) more than 15% of the assets of the
Company and its consolidated Subsidiaries, taken as a whole, or
(2) more than 15% of any class of equity securities of the
Company; (B) any tender offer or exchange offer, as defined
pursuant to the Exchange Act, that if consummated
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would result in any person beneficially owning, directly or
indirectly, 15% or more of any class of equity securities of the
Company; or (C) any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or other
similar transaction involving the Company.
(ii)
Superior Proposal
means any
bona fide written Acquisition Proposal that (A) relates to
more than 50% of the outstanding Shares or more than 50% of the
assets of the Company and its Subsidiaries, taken as a whole,
(B) is on terms that the Company Board determines in good
faith (after receiving the advice of its financial advisor and
outside counsel and after taking into account all financial,
legal, regulatory and other aspects of such proposal and of this
Agreement (including the relative risks of non-consummation and
any changes to the terms of this Agreement proposed by Parent to
the Company, prior to the expiration of the Notice Period, in
response to such proposal or otherwise)) are more favorable to
the Companys stockholders than this Agreement and
(C) the Company Board determines is reasonably capable of
being consummated.
(e) The Company shall (i) promptly request each person
that has executed a confidentiality agreement with the Company
prior to the date of this Agreement in connection with a process
relating to an Acquisition Proposal to return or destroy all
confidential information heretofore furnished to such person or
its Representatives by or on behalf of the Company or any of its
Subsidiaries, (ii) not amend or waive, and shall enforce,
the provisions of each such confidentiality agreement, except
that, without limiting any other provision of this Agreement,
this clause (ii) shall not apply to any standstill
provision contained therein to the extent compliance herewith
would be inconsistent with the fiduciary duties of the Company
Board under applicable Law and (iii) prohibit any access to
any third party to any such physical or electronic data room,
except as permitted herein.
Section
6.04
Directors
and Officers Indemnification and
Insurance
.
(a) The Surviving Corporation
and its Subsidiaries shall, and Parent shall cause the Surviving
Corporation to, honor and fulfill in all respects the
obligations of the Company and its Subsidiaries under any and
all indemnification agreements between the Company or any of its
Subsidiaries and any of their respective present or former
directors and officers (collectively, the
Indemnified
Parties
). In addition, the Certificate of
Incorporation and By-Laws of the Surviving Corporation shall
contain provisions no less favorable with respect to exculpation
and indemnification than are set forth in Articles VII and
VIII of the Amended and Restated Certificate of Incorporation of
the Company, as amended, and Article VII of the By-Laws of
the Company, respectively, which provisions shall not be
amended, repealed or otherwise modified for a period of six
years from the Effective Time in any manner that would affect
adversely the rights thereunder of individuals who, at or prior
to the Effective Time, were directors, officers, employees,
fiduciaries or agents of the Company or any of its Subsidiaries.
(b) For a period of six years after the Effective Time,
Parent and the Surviving Corporation shall, jointly and
severally, to the fullest extent permitted under applicable Law,
indemnify and hold harmless, each Indemnified Party against all
costs and expenses (including attorneys fees), judgments,
fines, losses, claims, damages, liabilities and settlement
amounts paid in connection with any claim, action, suit,
proceeding or investigation (whether arising before or after the
Effective Time), whether civil, criminal, administrative or
investigative, arising out of or pertaining to any action or
omission in their capacity as an officer, director, employee,
fiduciary or agent, whether occurring on or before the Effective
Time. In the event of any such claim, action, suit, proceeding
or investigation, (i) Parent or the Surviving Corporation
shall pay the reasonable fees and expenses of counsel selected
by the Indemnified Parties, which counsel shall be reasonably
satisfactory to the Surviving Corporation, promptly after
statements therefor are received, (ii) neither Parent nor
the Surviving Corporation shall settle, compromise or consent to
the entry of any judgment in any pending or threatened Action to
which an Indemnified Party is a party (and in respect of which
indemnification could be sought by such Indemnified Party
hereunder), unless such settlement, compromise or consent
includes an unconditional release of such Indemnified Party from
all liability arising out of such Action or such Indemnified
Party otherwise consents, and (iii) the Surviving
Corporation shall cooperate in the defense of any such matter;
provided
,
however
, that neither Parent nor the
Surviving Corporation shall be liable for any settlement
effected without the Surviving Corporations written
consent (which consent shall not be unreasonably withheld or
delayed); and
provided
,
further
, that, in the
event that any claim for indemnification
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is asserted or made within such six-year period, all rights to
indemnification in respect of such claim shall continue until
the disposition of such claim. The rights of each Indemnified
Person under this Section 6.04(b) shall be in addition to
any rights such person may have under the Certificate of
Incorporation or the By-Laws or similar organizational documents
of the Company and the Surviving Corporation or any of their
Subsidiaries, or under any Law or under any agreement of any
Indemnified Person with the Company or any of its Subsidiaries.
(c) The Surviving Corporation shall either (i) cause
to be obtained at the Effective Time tail insurance
policies with a claims period of at least six years from the
Effective Time with respect to directors and
officers liability insurance in amount and scope at least
as favorable as the Companys existing policies for claims
arising from facts or events that occurred on or prior to the
Effective Time; or (ii) maintain in effect for six years
from the Effective Time, if available, the current
directors and officers liability insurance policies
maintained by the Company (
provided
that the Surviving
Corporation may substitute therefor policies of at least the
same coverage containing terms and conditions that are not less
favorable) with respect to matters occurring prior to the
Effective Time;
provided
,
however
, that in no
event shall the Surviving Corporation be required to expend
pursuant to this Section 6.04(c) more than an amount per
year equal to 300% of current annual premiums paid by the
Company for such insurance;
provided
,
however
,
that in the event of an expiration, termination or cancellation
of such current policies, Parent or the Surviving Corporation
shall be required to obtain as much coverage as is possible
under substantially similar policies for such maximum annual
amount in aggregate annual premiums.
(d) In the event Parent or the Surviving Corporation or any
of their respective successors or assigns (i) consolidates
with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such
consolidation or merger, or (ii) transfers all or
substantially all of its properties and assets to any person,
then, and in each such case, proper provision shall be made so
that the successors and assigns of Parent or the Surviving
Corporation, as the case may be, shall succeed to the
obligations set forth in this Section 6.04.
(e) Parent shall cause the Surviving Corporation to perform
all of the obligations of the Surviving Corporation under this
Section 6.04.
Section
6.05
Employee
Benefits Matters
.
(a) Parent hereby
agrees that, for a period of eighteen months immediately
following the Effective Time, it shall, or it shall cause the
Surviving Corporation and its Subsidiaries to, provide each
employee of the Company and of each of the Companys
Subsidiaries as of the Effective Time (each, an
Employee
) with a base salary, employee
benefits, incentive compensation and other variable compensation
(other than, in each case, equity-based compensation) that,
taken as a whole, is no less favorable to the base salary,
employee benefits, incentive compensation and other variable
compensation (other than, in each case, equity-based
compensation), taken as a whole, provided to each such Employee
immediately prior to the Effective Time. From and after the
Effective Time, Parent shall cause the Surviving Corporation and
its Subsidiaries to honor in accordance with their terms, all
contracts, agreements, arrangements, policies, plans and
commitments of the Company and its Subsidiaries as in effect
immediately prior to the Effective Time that are applicable to
any current or former employees or directors of the Company or
any of its Subsidiaries, including all severance agreements
listed on Section 3.11(a) of the Company Disclosure
Schedule and excluding any of the foregoing to the extent
related to equity-based compensation. Parent hereby agrees that,
for a period of eighteen months immediately following the
Effective Time, it shall, or it shall cause the Surviving
Corporation and its Subsidiaries to, provide each Employee with
equity-based compensation that is no less favorable than the
equity-based compensation then provided to other similarly
situated employees of Parent and its Subsidiaries.
(b) Employees shall receive credit for all purposes
(including, for purposes of eligibility to participate, vesting,
benefit accrual and eligibility to receive benefits, but
excluding benefit accruals under any defined benefit pension
plan) under any employee benefit plan, program or arrangement
established or maintained by Parent, the Surviving Corporation
or any of their respective Subsidiaries under which each
Employee may be eligible to participate on or after the
Effective Time to the same extent recognized by the Company or
any of its Subsidiaries under comparable Plans immediately prior
to the Effective Time;
provided
,
however
, credit
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need not be recognized to the extent that such recognition would
result in any duplication of benefits. Such plan, program or
arrangement shall credit each such Employee for service accrued
or deemed accrued on or prior to the Effective Time with the
Company, any Subsidiary of the Company and all affiliates where
service with the affiliate was credited under a comparable Plan
of the Company prior to the Effective Time;
provided
,
however
, service need not be recognized to the extent
that such recognition would result in any duplication of
benefits.
(c) With respect to the welfare benefit plans, programs and
arrangements maintained, sponsored or contributed to by Parent
or its Subsidiaries (other than the Surviving Corporation and
its Subsidiaries) after the Effective Time (collectively,
Purchaser Welfare Benefit Plans
) and in which
an Employee may be eligible to participate on or after the
Effective Time, Parent shall (i) waive, or cause its
insurance carrier to waive, all limitations as to preexisting
and at-work conditions, if any, with respect to participation
and coverage requirements applicable to each participating
Employee under any Purchaser Welfare Benefit Plan (other than
any dependent life insurance plan) to the same extent waived
under a comparable Plan, and (ii) provide credit to each
Employee for any co-payments, deductibles and
out-of-pocket
expenses paid by such Employee under the Plans during the
relevant plan year up to and including the Effective Time.
(d) As of the Closing, Parent shall, or shall cause its
affiliates (including the Surviving Corporation) to, satisfy all
obligations of the Company and all of its Subsidiaries in
respect of any accrued but unpaid vacation, holiday, sick leave,
paid time off or similar liability as of the Closing.
(e) Nothing contained herein shall be construed as
requiring Parent to continue the employment of any specific
person. Furthermore, no provision of this Agreement shall be
construed as prohibiting or limiting the ability of Parent to
amend, modify or terminate any plans, programs, policies,
arrangements, agreements or understandings of Parent or the
Company or any of their respective Subsidiaries in accordance
with their terms. Nothing in this Section 6.05 shall confer
any rights or remedies of any kind upon any Employee or any
other person other than the parties hereto and their respective
successors and assigns.
(f) Prior to the Closing, the Company shall take all steps
necessary to ensure that no holder of any options, warrants,
rights or other instruments prior to the Closing shall have any
right to acquire following the Closing any capital stock of the
Company or any of its Subsidiaries or any other equity interest
therein (including phantom stock or stock
appreciation rights).
Section
6.06
Financing
.
(a) The
Company agrees to provide, and shall cause its Subsidiaries and
its and their Representatives to provide, all reasonable
cooperation in connection with the arrangement of any financing
necessary to consummate the Transactions (the
Financing
) as may be reasonably requested by
Parent and that is necessary or customary in connection with
Parents efforts to obtain the Financing (
provided
that such requested cooperation does not unreasonably
interfere with the ongoing operations of the Company and its
Subsidiaries), including (i) participation in meetings,
road shows, drafting sessions, rating agency presentations and
due diligence sessions, (ii) furnishing Parent and its
Representatives with real estate and other pertinent information
regarding the Company and its Subsidiaries as is necessary or
customary in connection with the Financing and any security
required therefor, including (A) the financial statements
and financial data described in Schedule 6.06(a) and
(B) the historical financial statements, information
reasonably necessary for the preparation of pro forma financial
statements, business and other financial data of the Company and
of the type required by
Regulation S-X
(other than
Rule 3-10
thereof) and
Regulation S-K
under the Securities Act and, in all cases, of the type and form
customarily included in offering documents for securities
offerings by the Company under Rule 144A under the
Securities Act (all information required to be delivered
pursuant to this clause (ii) being referred to as the
Required Information
), (iii) executing
and delivering any pledge and security documents, currency or
interest rate hedging arrangements or other definitive financing
documents or other certificates (including a certificate of the
chief accounting officer of the Company with respect to solvency
matters relating to the Company) and documents as may be
reasonably requested by Parent, (iv) using reasonable best
efforts to obtain accountants comfort letters,
accountants consent letters, legal opinions, appraisals,
lien searches, surveys and title insurance as reasonably
requested by Parent and (v) assisting Parent and its
financing sources in the preparation of (A) customary
offering documents, bank information memoranda (including the
execution of customary representation letters
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reasonably satisfactory to the Company in connection with such
bank information memoranda) and similar documents for any of the
Financing;
provided
that any such offering document, bank
information memoranda or similar documents contains disclosure
and financial statements with respect to the Company or the
Surviving Corporation reflecting the Surviving Corporation
and/or
its
Subsidiaries as primary obligors or guarantors; and
(B) materials for rating agency presentations;
provided
that none of the Company or any of its Subsidiaries shall be
required to pay any commitment or any other fee or incur any
other liability in connection with the Financing prior to the
Effective Time;
provided, further
, that the effectiveness
of any documentation executed by the Company or any of its
Subsidiaries shall be subject to the consummation of the
Closing. Parent shall, promptly upon termination of this
Agreement, reimburse the Company for all reasonable
out-of-pocket
costs incurred by the Company or its Subsidiaries in connection
with such cooperation or any actions contemplated by this
Section 6.06(a). The Company agrees to provide, and shall
cause its Subsidiaries and its and their Representatives to
provide, all information and documents requested under this
Section 6.06(a) promptly and, in any event, at least
20 days prior to the date of the Closing.
(b) All information regarding the Company obtained by
Parent or Merger Sub or its or their Representatives pursuant to
Section 6.06(a) shall be kept confidential as and to the
extent required by the Confidentiality Agreement;
provided
that the Company and Parent shall agree to amend or waive
the Confidentiality Agreement to the extent such information is
required under the federal securities Laws to be included in an
offering document in connection with the Financing. Parent
acknowledges and agrees that the Company shall not incur any
liability to any person prior to the Effective Time in
connection with any Financing. Parent and Merger Sub shall, on a
joint and several basis, indemnify and hold harmless the
Company, its Subsidiaries and their respective Representatives
for and against any and all liabilities, losses, damages,
claims, costs, expenses, interest, awards, judgments and
penalties suffered or incurred by them in connection with the
arrangement of the Financing and any information utilized in
connection therewith.
(c) The Company shall commence as soon as reasonably
practicable after the receipt of a written request from Parent
to do so, offers to purchase and related consent solicitations
with respect to any or all of the outstanding debt securities of
the Company specified by Parent and permitted by applicable Law
(collectively, the
Notes
) on the terms and
subject to conditions reasonably requested by Parent
(collectively, the
Debt Offers
). Parent shall
prepare all necessary documentation in connection with the Debt
Offer, subject to review by the Company. Notwithstanding the
foregoing, the closing of the Debt Offers shall be conditioned
on the consummation of the Merger. Parent shall, promptly upon
termination of this Agreement, reimburse the Company for all
reasonable
out-of-pocket
costs incurred by the Company and its Subsidiaries in connection
with the actions contemplated by this Section 6.06(c).
Parent acknowledges and agrees that the Company and its
Subsidiaries shall not incur any liability to any person prior
to the Effective Time with respect to any Debt Offer or any
actions contemplated by this Section 6.06(c), and Parent
agrees to indemnify and hold harmless the Company, its
Subsidiaries and their respective Representatives for and
against any and all liabilities, losses, damages, claims, costs,
expenses, interest, awards, judgments and penalties suffered or
incurred by them in connection with the Debt Offers, the
arrangement of the Debt Offers, information utilized in
connection therewith and any actions contemplated by this
Section 6.06(c).
Section
6.07
Further
Action
.
(a) Each party shall use
reasonable best efforts to (i) promptly obtain all
authorizations, consents, orders and approvals of all
Governmental Authorities and officials that may be or become
necessary for its execution and delivery of, and the performance
of its obligations pursuant to, this Agreement,
(ii) cooperate fully with the other parties in promptly
seeking to obtain all such authorizations, consents, orders,
approvals, licenses, permits and waivers, (iii) provide
such other information to any Governmental Authority as such
Governmental Authority may reasonably request in connection
herewith, (iv) obtain all necessary consents, approvals or
waivers from third parties and (v) execute and deliver any
additional instruments necessary to consummate the Transactions
and to fully carry out the purposes of this Agreement. Each
party hereto agrees to make as promptly as practicable after the
date of this Agreement its respective filing, if necessary,
pursuant to the HSR Act with respect to the Transactions and to
supply as promptly as practicable to the appropriate
Governmental Authorities any additional information and
documentary material that may be requested pursuant to the HSR
Act. Each party hereto agrees to make as promptly as practicable
after the date of this Agreement its respective filings and
notifications, if any, under
A-24
any other applicable antitrust, competition, or trade
regulation Law, and to supply as promptly as practicable to
the appropriate Governmental Authorities any additional
information and documentary material that may be requested
pursuant to the applicable antitrust, competition, or trade
regulation Law.
(b) Without limiting the generality of the undertaking of
Parent pursuant to Section 6.07(a), Parent agrees to take
any and all steps necessary to avoid or eliminate each and every
impediment under any antitrust, competition or trade
regulation Law that may be asserted by any Governmental
Authority or any other party so as to enable the parties hereto
to consummate the Transactions, and in any event prior to the
Termination Date, including proposing, negotiating, committing
to and effecting, by consent decree, hold separate orders, or
otherwise, the sale, divestiture or disposition of such of its
assets, properties or businesses or of the assets, properties or
businesses to be acquired by it pursuant hereto;
provided,
however
, that any such sale, divestiture, disposition or
other arrangement shall be conditioned upon the consummation of
the Transactions. In addition, Parent shall defend through
litigation on the merits any claim asserted in court by any
party in order to avoid entry of, or to have vacated or
terminated, any decree, order or judgment (whether preliminary
or permanent) that would prevent the Closing prior to the
Termination Date. Notwithstanding anything in this Agreement to
the contrary, no provision of this Agreement shall require, or
be construed to require, Parent or any of its Subsidiaries to
agree to or take any action that, individually or in the
aggregate, would result in a Burdensome Condition. For purposes
of this Agreement, a
Burdensome Condition
shall mean making proposals, executing or carrying out
agreements (including consent decrees) or submitting to Laws
(i) providing for the license, sale or other disposition or
holding separate (through the establishment of a trust or
otherwise) of any assets or categories of assets of Parent, the
Company or any of their respective Subsidiaries or the holding
separate of the capital stock of the Company or any such
Subsidiary or (ii) imposing or seeking to impose any
limitation on the ability of Parent, the Company or any of their
respective Subsidiaries to conduct their respective businesses
(including with respect to market practices and structure) or to
own such assets or to acquire, hold or exercise full rights of
ownership of the business of the Company or its Subsidiaries or
of Parent or its Subsidiaries, that, in the case of
clause (i) and (ii), would, individually or in the
aggregate, reasonably be expected to result in a Behavioral
Health Business Material Adverse Effect.
(c) Each party shall promptly notify the other party hereto
of any material communication it or any of its affiliates
receives from any Governmental Authority relating to the matters
that are the subject of this Agreement. Each party shall be
entitled to review in advance any proposed substantive
communication by any other party to any Governmental Authority
in connection with the Transactions, and each party shall make
any revisions thereto reasonably requested by the other party.
None of the parties to this Agreement shall agree to participate
in any meeting with any Governmental Authority in respect of any
filings, investigation (including any settlement of the
investigation), litigation or other inquiry relating to the
matters that are the subject of this Agreement unless it
consults with the other party in advance and, to the extent not
prohibited by such Governmental Authority, gives the other party
the opportunity to attend and participate at such meeting. The
parties to this Agreement will coordinate and cooperate fully
with each other in exchanging such information and providing
such assistance as the other party may reasonably request in
connection with the foregoing. The parties to this Agreement
will provide each other with copies of all material
correspondence, filings or communications between them or any of
their Representatives, on the one hand, and any Governmental
Authority or members of its staff, on the other hand, with
respect to this Agreement and the transactions contemplated by
this Agreement;
provided, however
, that materials may be
redacted (i) to remove references concerning the valuation
of the Company, (ii) as necessary to comply with
contractual arrangements, and (iii) as necessary to address
reasonable attorney-client or other privilege concerns. In
furtherance of the foregoing, all information exchanged between
or among the parties under this Section 6.07 shall be
subject to appropriate confidentiality arrangements.
Notwithstanding anything to the contrary, the parties agree
that, except as otherwise provided by Law, any and all
proceedings, hearings and other dealings with Governmental
Authorities relating to antitrust matters shall be led by Parent
and its Representatives;
provided
, that Parent may make
all final strategic decisions after consulting in good faith
with the Company.
(d) Neither Parent nor Merger Sub shall enter into any
agreement, transaction, or any agreement to effect any
transaction (including any merger or acquisition) that might
reasonably be expected to make it materially more difficult, or
to materially increase the time required, to: (i) obtain
the expiration or termination of the
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waiting period under the HSR Act, or any other applicable
antitrust, competition, or trade regulation Law, applicable
to the Transactions, (ii) avoid the entry of, the
commencement of litigation seeking the entry of, or to effect
the dissolution of, any injunction, temporary restraining order
or other order that would materially delay or prevent the
consummation of the Transactions, or (iii) obtain all
authorizations, consents, orders and approvals of Governmental
Authorities necessary for the consummation of the Transactions,
including any authorizations, consents, orders or approvals
required by any Health Care Law or Government Program.
(e) With respect to any stockholder litigation against the
Company
and/or
its
directors relating to the Transactions, Company shall
(i) promptly notify Parent of the initiation of any such
litigation, (ii) promptly notify Parent of any material
communication or development with respect to such litigation and
(iii) consult in good faith with Parent with respect to any
material decisions and the Companys general strategy
regarding such litigation.
Section
6.08
Obligations
of Parent and Merger Sub
.
Parent shall take
all action necessary to cause Merger Sub to perform its
obligations under this Agreement and to consummate the
Transactions on the terms and subject to the conditions set
forth in this Agreement.
Section
6.09
Public
Announcements
.
The initial press release
relating to this Agreement shall be a joint press release the
text of which has been agreed to by each of Parent and the
Company. Thereafter, each of Parent and the Company shall
consult with each other before issuing any press release or
otherwise making any public statements with respect to this
Agreement or any of the Transactions, except to the extent
public disclosure is required by applicable Law or the
requirements of the Nasdaq Stock Market, in which case the
issuing party shall use its reasonable best efforts to consult
with the other party before issuing any press release or making
any such public statements, and except with respect to the
matters described in Sections 6.03, 8.01 and 8.03.
Section
6.10
Transfer
Taxes
.
The Company and Parent shall cooperate
in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any
sales, transfer, stamp, stock transfer, value added, use, real
property transfer or gains and any similar Taxes which become
payable in connection with the Transactions. Notwithstanding
anything to the contrary herein, each of Parent and the
Surviving Corporation agrees to assume liability for and pay any
sales, transfer, stamp, stock transfer, value added, use, real
property transfer or gains and any similar Taxes of the Company
or any of its Subsidiaries, as well as any transfer, recording,
registration and other fees that may be imposed upon, payable by
or incurred by the Company or any of its Subsidiaries in
connection with this Agreement and the Transactions.
ARTICLE VII
CONDITIONS
TO THE MERGER
Section
7.01
Conditions
to the Obligations of Each Party
.
The
obligations of the Company, Parent and Merger Sub to consummate
the Merger are subject to the satisfaction or waiver (where
permissible) of the following conditions:
(a)
Company Stockholder
Approval
.
The Company shall have obtained the
Stockholder Approval.
(b)
No Order
.
No Governmental
Authority shall have enacted, issued, promulgated, enforced or
entered any Law or taken any other action after the date of this
Agreement which is in effect and has the effect of restraining,
enjoining or otherwise prohibiting the consummation of the
Merger.
(c)
U.S. Antitrust Approvals and Waiting
Periods
.
Any waiting period (and any
extension thereof) applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.
Section
7.02
Conditions
to the Obligations of Parent and Merger
Sub
.
The obligations of Parent and Merger Sub
to consummate the Merger are subject to the satisfaction or
waiver (where permissible) of the following additional
conditions:
(a)
Representations and
Warranties
.
The representations and
warranties of the Company set forth in subsections (a) and
(b) of Section 3.03 (Capitalization), in
Section 3.04 (Authority Relative to This
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Agreement) and in Section 3.18 (Board Approval; Vote
Required) shall be true and correct in all respects (except for
de
minimis
failures to be true and correct), and
the representation and warranty of the Company set forth in
subsection (a) of Section 3.09 (Absence of Certain
Changes or Events) shall be true and correct in all respects, in
each case as though made as of the Closing (except to the extent
expressly made as of an earlier date, in which case as of such
earlier date). All other representations and warranties of the
Company set forth in this Agreement shall be true and correct
(disregarding all qualifications or limitations as to
materiality and Company Material Adverse
Effect set forth therein) as of the Closing as though made
as of the Closing (except to the extent expressly made as of an
earlier date, in which case as of such earlier date), except
where the failure of such other representations and warranties
to be so true and correct would not, individually or in the
aggregate, reasonably be expected to have a Company Material
Adverse Effect.
(b)
Agreements and Covenants
.
The
Company shall have performed or complied in all material
respects with all material agreements and material covenants
required by this Agreement to be performed or complied with by
it on or prior to the Closing.
Section
7.03
Conditions
to the Obligations of the Company
.
The
obligations of the Company to consummate the Merger are subject
to the satisfaction or waiver (where permissible) of the
following additional conditions:
(a)
Representations and
Warranties
.
The representations and
warranties of Parent and Merger Sub that are qualified by
materiality shall be true and correct in all respects, and the
representations and warranties of Parent and Merger Sub
contained in this Agreement that are not so qualified shall be
true and correct in all respects, in each case as of the
Closing, as though made as of the Closing (except to the extent
expressly made as of an earlier date, in which case as of such
earlier date ), except where the failure of such representations
and warranties to be so true and correct would not, individually
or in the aggregate, prevent or materially delay consummation of
any of the Transactions or otherwise prevent or materially delay
Parent or Merger Sub from performing its obligations under this
Agreement.
(b)
Agreements and
Covenants
.
Parent and Merger Sub shall have
performed or complied in all material respects with all material
agreements and material covenants required by this Agreement to
be performed or complied with by it on or prior to the Closing.
ARTICLE VIII
TERMINATION,
AMENDMENT AND WAIVER
Section
8.01
Termination
.
This
Agreement may be terminated and the Merger and the other
Transactions may be abandoned at any time prior to the Effective
Time by action taken or authorized by the Board of Directors of
the terminating party or parties, notwithstanding any prior
adoption of this Agreement by the stockholders of the Company,
as follows (the date of any such termination, the
Termination Date
):
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the Effective Time
shall not have occurred on or before December 31, 2010 (the
End Date
);
provided
,
however
,
that the right to terminate this Agreement under this
Section 8.01(b) shall not be available to any party whose
failure to fulfill any material obligation under this Agreement
has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date;
(c) by either Parent or the Company if any Governmental
Authority shall have enacted, issued, promulgated, enforced or
entered any Law or taken any other action after the date of this
Agreement permanently restraining, enjoining or otherwise
prohibiting the consummation of the Merger, and such Law or
action shall have become final and nonappealable;
provided
,
however
, that the right to terminate
under this Section 8.01(c) shall not be available to any
party whose failure to fulfill any material obligation under
this Agreement has been the principal cause of such action;
A-27
(d) by either Parent or the Company if this Agreement shall
fail to receive the Stockholder Approval at the Company
Stockholders Meeting or any adjournment or postponement
thereof;
(e) by Parent if (i) any Specified Board Action shall
have been taken by or on behalf of the Company Board or
(ii) the Company shall have materially breached its
agreements and covenants set forth in Section 6.03;
(f) by the Company at any time prior to the adoption of
this Agreement by the Companys stockholders in accordance
with Section 6.03(b);
provided, however
, that any
such purported termination pursuant to this Section 8.01(f)
shall be void and of no force or effect unless the Company
concurrently with such termination pays to Parent the Company
Termination Fee in accordance with Section 8.03;
provided
that the Company shall not have the right to
terminate this Agreement pursuant to this Section 8.01(f)
if the Company is then in material breach of its agreements and
covenants set forth in Section 6.03;
(g) by Parent, if the Company shall have breached any of
its representations or warranties, or failed to perform any of
its agreements or covenants set forth in this Agreement, which
breach or failure to perform (i) would give rise to the
failure of a condition set forth in Section 7.02(a) or
7.02(b) and (ii) is incapable of being cured prior to the
End Date;
provided
that Parent shall not have the right
to terminate this Agreement pursuant to this
Section 8.01(g) if either Parent or Merger Sub is then in
material breach of any of its representations, warranties,
agreements or covenants hereunder; or
(h) by the Company, if Parent or Merger Sub shall have
breached any of its representations or warranties, or failed to
perform any of its agreements or covenants set forth in this
Agreement, which breach or failure to perform (i) would
give rise to the failure of a condition set forth in
Section 7.03(a) or 7.03(b) and (ii) is incapable of
being cured prior to the End Date;
provided
that the
Company shall not have the right to terminate this Agreement
pursuant to this Section 8.01(h) if the Company is then in
material breach of any of its representations, warranties,
agreements or covenants hereunder.
Section
8.02
Effect
of Termination
.
In the event of the
termination of this Agreement pursuant to Section 8.01,
this Agreement shall forthwith become void, and there shall be
no liability under this Agreement on the part of any party
hereto (except that the provisions of Section 6.02(b),
Section 6.06, this Section 8.02, Section 8.03 and
Article IX shall survive any such termination);
provided
that nothing in Section 8.01 or this Section 8.02
shall be deemed to release any party from any liability for any
breach by such party of any representation, warranty or covenant
set forth in this Agreement, or impair the right of any party to
compel specific performance by another party of its obligations
under this Agreement.
Section
8.03
Fees
and Expenses
.
(a) All Expenses incurred
in connection with this Agreement, the Transactions, the
solicitation of stockholder approvals and all other matters
related to the closing of the Merger shall be paid by the party
incurring such Expenses, whether or not the Merger or any other
Transaction is consummated, except as otherwise set forth in
this Agreement. Notwithstanding the foregoing, one-half of all
filing fees payable in connection with the filings made pursuant
to the HSR Act with respect to the Transactions, and one-half of
all Expenses incurred in connection with the printing, filing
and mailing of the Proxy Statement, shall be paid by each of the
Company and Parent.
Expenses
, as used in this
Agreement, shall include all reasonable
out-of-pocket
expenses (including all fees and expenses of counsel,
accountants, investment bankers, financing sources, hedging
counterparties, experts and consultants to a party hereto and
its affiliates) incurred by a party or on its behalf in
connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement. All
payments required to be made by a party pursuant to this
Section 8.03 shall be made by such party and no third party
shall directly or indirectly make all or any portion of such
payments. Each of the Company and Parent acknowledges that the
agreements contained in this Section 8.03 are an integral
part of the Transactions.
(b) If this Agreement shall be terminated:
(i) by Parent or the Company pursuant to
Section 8.01(b), then, if (A) at or prior to the
Termination Date an Acquisition Proposal shall have been
publicly announced and not publicly withdrawn or shall have
otherwise become publicly known (any person that shall have made
such a proposal at or prior to
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the Termination Date, together with its affiliates, a
Competing Bidder
) and (B) within twelve
months of the Termination Date the Company enters into, or
submits to the stockholders of the Company for adoption, an
agreement with respect to, or consummates, any Acquisition
Proposal, then the Company shall pay Parent the amount of
$71.5 million (the
Company Termination
Fee
);
(ii) by Parent or the Company pursuant to
Section 8.01(d), then (A) the Company shall pay Parent
all of its Expenses incurred in connection with the Transactions
on or prior to the Termination Date (the
Expense
Reimbursement
) and (B) if (1) at or prior to
the date of the Company Stockholders Meeting, an
Acquisition Proposal shall have been publicly announced and not
publicly withdrawn or shall have otherwise become publicly known
and (2) within twelve months of the Termination Date the
Company enters into, or submits to the stockholders of the
Company for adoption, an agreement with respect to, or
consummates, any Acquisition Proposal, then the Company shall
pay Parent the Company Termination Fee
minus
any Expense
Reimbursement previously paid to Parent;
(iii) by Parent pursuant to Section 8.01(e), then, the
Company shall pay Parent the Company Termination Fee;
(iv) by the Company pursuant to Section 8.01(f), then
the Company shall pay to Parent the Company Termination
Fee; or
(v) by Parent pursuant to Section 8.01(g), then, if
(A) at or prior to the date of the Company
Stockholders Meeting, an Acquisition Proposal shall have
been publicly announced and not publicly withdrawn or shall have
otherwise become publicly known and (B) within twelve
months of the Termination Date the Company enters into, or
submits to the stockholders of the Company for adoption, an
agreement with respect to, or consummates, any Acquisition
Proposal, then the Company shall pay Parent the Company
Termination Fee.
(c) The Company Termination Fee
and/or
Expense Reimbursement payable by the Company under this
Section 8.03 shall be paid to Parent or its designee by the
Company in immediately available funds as follows:
(i) in the case of Section 8.03(b)(iv), the applicable
payment shall be made concurrently with and as a condition to
the effectiveness of a termination of this Agreement by the
Company pursuant to Section 8.01(f);
(ii) in the case of Section 8.03(b)(ii)(A) or
Section 8.03(b)(iii), the applicable payment shall be made
on or prior to the date of the event giving rise to the
obligation to make such payment; and
(iii) in the case of Section 8.03(b)(i),
Section 8.03(b)(ii)(B) or Section 8.03(b)(v),
(x) if the event giving rise to the obligation to make such
payment is the Company entering into, or submitting to the
stockholders of the Company for adoption, an agreement with
respect to, or consummating, any Acquisition Proposal with a
Competing Bidder, the applicable payment shall be made on or
prior to the date of such event or (y) if the event giving
rise to the obligation to make such payment is the Company
entering into, or submitting to the stockholders of the Company
for adoption, an agreement with respect to, or consummating, any
Acquisition Proposal with any person other than a Competing
Bidder, the applicable payment shall be made on or prior to the
consummation of any Acquisition Proposal.
Notwithstanding anything to the contrary in this Agreement, the
payment to Parent or its designees of the Company Termination
Fee
and/or
the Expense Reimbursement shall be the sole and exclusive remedy
of Parent for any loss suffered by Parent or Merger Sub as a
result of the failure of the Merger and the other Transactions
to be consummated and upon such payment in accordance with this
Section 8.03, the Company shall not have any further
liability or obligation relating to or arising out of this
Agreement or the Transactions (except in the case of fraud or a
breach by the Company of this Agreement).
(d) The Company acknowledges and agrees that the agreements
contained in subsections (b) and (c) of this
Section 8.03 are an integral part of the Transactions, and
that, without these agreements, Parent would not have entered
into this Agreement; accordingly, if the Company fails to pay
any amounts due and payable pursuant to subsections (b) and
(c) of this Section 8.03, and, in order to obtain such
payment, Parent commence a suit that results in a judgment
against the Company for the Company Termination Fee or the
A-29
Expense Reimbursement, the Company shall pay to Parent their
costs and expenses (including attorneys fees and expenses)
in connection with such suit, together with interest on the
amount of the Company Termination Fee or Expense Reimbursement,
as the case may be, from the date such payment was required to
be made until the date of payment at the prime rate of JPMorgan
Chase Bank, N.A. in effect on the date such payment was required
to be made.
(e) For purposes of this Section 8.03, Acquisition
Proposal shall have the meaning assigned to such term in
Section 6.03(d), except that references to 15% in
clauses (1) and (2) of the definition thereof shall be
deemed to be references to 50% and clause (3) of the
definition thereof shall be deemed amended and replaced in its
entirety by the following language: (3) any merger,
consolidation, business combination, recapitalization or other
similar transaction involving the Company pursuant to which
stockholders of the Company immediately prior to the
consummation of such transaction would cease to own directly or
indirectly at least 50% of the voting power of the outstanding
securities of the Company (or of another person that directly or
indirectly would own all or substantially all the assets of the
Company) immediately following such transaction in the same
proportion as they owned prior to the consummation of such
transaction.
ARTICLE IX
GENERAL
PROVISIONS
Section
9.01
Non-Survival
of Representations, Warranties and
Agreements
.
The representations, warranties
and agreements in this Agreement and in any certificate
delivered pursuant hereto shall terminate at the Effective Time;
provided
,
however
, that this Section 9.01
shall not limit any covenant or agreement of the parties which
by its terms contemplates performance after the Effective Time.
Section
9.02
Notices
.
All
notices, requests, claims, demands and other communications
hereunder shall be in writing in the English language and shall
be given (and shall be deemed to have been duly given upon
receipt) by delivery in person, by a nationally recognized next
day courier service, registered or certified mail (postage
prepaid, return receipt requested) or by facsimile transmission.
All notices hereunder shall be delivered to the respective
parties at the following addresses (or at such other address for
a party as shall be specified in a notice given in accordance
with this Section 9.02):
if to Parent or Merger Sub:
Universal Health Services, Inc.
367 South Gulph Road
PO Box 61558
King of Prussia, Pennsylvania
19406-0958
Facsimile No:
(610) 382-4390
Attention: Debra Osteen
with a copy to:
Cravath, Swaine & Moore LLP
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Facsimile No:
(212) 474-3700
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Attention:
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James C. Woolery, Esq.
Minh Van Ngo, Esq.
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if to the Company:
Psychiatric Solutions, Inc.
6640 Carothers Parkway, Suite 500
Franklin, Tennessee 37067
Facsimile No:
(615) 312-5720
Attention: Chris Howard, Esq.
A-30
with a copy to:
Shearman & Sterling LLP
599 Lexington Avenue
New York, New York 10022
Facsimile No:
(212) 848-7179
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Attention:
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Peter D. Lyons, Esq.
Eliza W. Swann, Esq.
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and
Waller Lansden Dortch & Davis LLP
511 Union Street
Suite 2700
Nashville, TN 37219
Facsimile No:
(615) 244-6804
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Attention:
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James H. Nixon III, Esq.
Keith E. Thompson, Esq.
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Section
9.03
Certain
Definitions
.
(a) For purposes of this
Agreement:
affiliate
of a specified person means
a person who, directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common
control with, such specified person.
Behavioral Health Business Material Adverse
Effect
means any event, circumstance, state of
facts, change or effect that is materially adverse to the
business, financial condition or results of operations of the
aggregate of (x) the behavioral health care services
business of Parent and its Subsidiaries and (y) the Company
and its Subsidiaries.
business day
means any day on which
the principal offices of the SEC in Washington, D.C. are
open to accept filings, or, in the case of determining a date
when any payment is due, any day on which banks are not required
or authorized to close in the City of New York.
Code
means the Internal Revenue Code
of 1986, as amended.
Company Health Care Business
means any
health care business operated by the Company or any of its
Subsidiaries.
Company Health Care Facility
means any
health care facility that is leased or owned, and operated, by
the Company or any of its Subsidiaries.
Contract
means any contract,
agreement, lease, license, sales order, purchase order,
instrument or other commitment that is binding on any person or
any part of its property under applicable Law.
control
(including the terms
controlled by
and
under common
control with
) means the possession, directly or
indirectly, or as trustee or executor, of the power to direct or
cause the direction of the management and policies of a person,
whether through the ownership of voting securities, as trustee
or executor, by contract or credit arrangement or otherwise.
Credit Agreement
means that certain
Second Amended and Restated Credit Agreement, dated July 1,
2005 (as amended through the date hereof) among the Company, the
other borrowers party thereto, the guarantors party thereto and
the lenders and agents party thereto.
Health Care Laws
means all relevant
state and federal civil or criminal health care Laws applicable
to any Company Health Care Business, including Medicaid,
Medicare, the federal Anti-kickback Statute (42 U.S.C.
§ 1320a-7b(b)),
the Stark Law (42 U.S.C. § 1395nn), the civil
False Claims Act (31 U.S.C. § 3729 et seq.), the
administrative False Claims Law (42 U.S.C.
§ 1320a-7b(a)),
the Civil Money Penalties Law (42 U.S.C.
§ 1320a-7a;
42 U.S.C.
§ 1320c-8(a)),
the Health Insurance Portability and Accountability Act of 1996
(42 U.S.C. § 1320d et seq.), the exclusion Laws
(42 U.S.C.
§ 1320a-7),
any Law with respect to licensing a Company Health Care
Business, or the regulations promulgated
A-31
pursuant to such Laws, and comparable state Laws, and all
statutes and regulations related to the education of, housing
of, or care for youth.
knowledge of the Company
or
Companys knowledge
means the
actual knowledge (after reasonable inquiry) of (i) Joey
Jacobs, President and Chief Executive Officer, (ii) Ronald
Fincher, Chief Operating Officer, (iii) Christopher Howard,
Executive Vice President, General Counsel and Secretary,
(iv) Jack Polson, Executive Vice President and Chief
Accounting Officer, (v) Brent Turner, Executive Vice
President, Finance & Admin, (vi) Kathy Bolmer,
Executive Vice President, Quality & Compliance, and
(vii) Steven Davidson, Chief Development Officer.
Lien
means with respect to any asset,
any mortgage, pledge, lien, charge, security interest or
encumbrance of any kind in respect of such asset.
Medicaid
means the medical assistance
program established by Title XIX of the Social Security Act
(42 U.S.C. Sections 1396 et seq., as amended) and any
statute succeeding thereto.
Medicare
means the health insurance
program for the aged and disabled established by
Title XVIII of the Social Security Act (42 U.S.C.
Sections 1395 et seq., as amended) and any statute
succeeding thereto.
Permitted Lien
means
(a) statutory Liens for current Taxes, special assessments
or other governmental charges not yet due and payable or the
amount or validity of which is being contested in good faith by
appropriate proceedings and for which appropriate reserves have
been established in accordance with GAAP,
(b) mechanics, materialmens, carriers,
workers, repairers and similar statutory liens
arising or incurred in the ordinary course of business,
(c) zoning, entitlement, building and other land use
regulations imposed by governmental agencies having jurisdiction
over any Owned Real Property which are not violated in any
material respect by the current use and operation of the Owned
Real Property, (d) deposits or pledges made in connection
with, or to secure payment of, workers compensation,
unemployment insurance, old age pension programs mandated under
applicable legal requirements or other social security,
(e) covenants, conditions, restrictions, easements,
encumbrances and other similar matters of record affecting title
to but not adversely affecting current occupancy or use of the
Owned Real Property in any material respect,
(f) restrictions on the transfer of securities arising
under federal and state securities Laws, (g) any Liens
caused by state statutes
and/or
principles of common law and specific agreements within some
leases providing for landlord liens with respect to
tenants personal property, fixtures
and/or
leasehold improvements at the subject premises,
(h) restrictions not materially affecting the present use
of such assets or properties, (i) Liens securing the Credit
Agreement, and (j) Liens permitted pursuant to
Section 8.01 of the Credit Agreement.
person
means an individual,
corporation, partnership, limited partnership, limited liability
company, syndicate, person (including a person as
defined in Section 13(d)(3) of the Exchange Act), trust,
association or entity or government, political subdivision,
agency or instrumentality of a government.
Special Committee
means the committee
of the Company Board (the members of which are not affiliated
with Parent or Merger Sub and are not members of the
Companys management) formed for the purpose of, among
other things, evaluating and making a recommendation to the full
Company Board with respect to this Agreement.
Subsidiary
or
Subsidiaries
of the Company, the
Surviving Corporation, Parent or any other person means an
entity controlled by such person, directly or indirectly
(including through one or more intermediaries), and, without
limiting the foregoing, includes any entity in respect of which
such person, directly or indirectly, beneficially owns 50% or
more of the voting securities or equity.
(b) The following terms have the meaning set forth in the
Sections set forth below:
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Location of
|
Defined Term
|
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Definition
|
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Acquisition Proposal
|
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§ 6.03(d)(i)
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A-32
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Location of
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Defined Term
|
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Definition
|
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Action
|
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§ 3.10
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Acquisition Agreement
|
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§ 6.03(b)
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Agreement
|
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Preamble
|
Book-Entry Shares
|
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§ 2.02(b)(ii)
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Burdensome Condition
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§ 6.07(b)
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Certificate of Merger
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§ 1.03
|
Certificates
|
|
§ 2.02(b)(ii)
|
Closing
|
|
§ 1.02
|
Commitment Letter
|
|
§ 4.08
|
Company
|
|
Preamble
|
Company Board
|
|
Recitals
|
Company Board Recommendation
|
|
§ 3.18(a)(iii)
|
Company Controlled Entity
|
|
§ 3.11(a)
|
Company Common Stock
|
|
Recitals
|
Company Disclosure Schedule
|
|
Article III
|
Company Material Adverse Effect
|
|
§ 3.01(a)
|
Company Permits
|
|
§ 3.06
|
Company Preferred Stock
|
|
§ 3.03(a)(ii)
|
Company Stock Option
|
|
§ 2.04(a)(ii)
|
Company Stock Plans
|
|
§ 2.04(a)(i)
|
Company Stockholders Meeting
|
|
§ 6.01(b)
|
Company Termination Fee
|
|
§ 8.03(b)(i)
|
Competing Bidder
|
|
§ 8.03(b)(i)
|
Confidentiality Agreement
|
|
§ 6.02(b)
|
Debt Offers
|
|
§ 6.06(c)
|
DGCL
|
|
Recitals
|
Dissenting Shares
|
|
§ 2.05(a)
|
Effective Time
|
|
§ 1.03
|
Employee
|
|
§ 6.05(a)
|
End Date
|
|
§ 8.01(b)
|
Environmental Laws
|
|
§ 3.17(a)
|
ERISA
|
|
§ 3.11(a)
|
Exchange Act
|
|
§ 3.05(b)(i)
|
Exchange Fund
|
|
§ 2.02(a)(ii)
|
Expenses
|
|
§ 8.03(a)
|
Expense Reimbursement
|
|
§ 8.03(b)(ii)
|
Financing
|
|
§ 6.06(a)
|
GAAP
|
|
§ 3.07(b)
|
Governmental Authority
|
|
§ 3.05(b)
|
Government Program
|
|
§ 3.05(b)(vii)
|
HSR Act
|
|
§ 3.05(b)(v)
|
Indemnified Parties
|
|
§ 6.04(a)
|
IRS
|
|
§ 3.11(c)
|
Law
|
|
§ 3.05(a)(ii)
|
A-33
|
|
|
|
|
Location of
|
Defined Term
|
|
Definition
|
|
Material Contracts
|
|
§ 3.15
|
Merger
|
|
Recitals
|
Merger Consideration
|
|
§ 2.01(a)
|
Merger Sub
|
|
Preamble
|
Notes
|
|
§ 6.06(c)
|
Notice of Adverse Action
|
|
§ 6.03(b)
|
Notice Period
|
|
§ 6.03(b)
|
Owned Real Property
|
|
§ 3.13
|
Parent
|
|
Preamble
|
Paying Agent
|
|
§ 2.02(a)(i)
|
Plans
|
|
§ 3.11(a)
|
Proxy Statement
|
|
§ 3.05(b)(ii)
|
Purchaser Welfare Benefit Plans
|
|
§ 6.05(c)
|
Real Property Leases
|
|
§ 3.13
|
Regulatory Condition
|
|
§ 3.01(a)
|
Representatives
|
|
§ 6.02(a)(i)
|
Required Information
|
|
§ 6.06(a)(ii)
|
SEC
|
|
§ 3.05(b)(ii)
|
SEC Reports
|
|
§ 3.07(a)
|
Section 262
|
|
§ 2.05(a)
|
Securities Act
|
|
§ 3.07(a)(i)
|
Shares
|
|
§ 2.01(a)
|
Specified Board Action
|
|
§ 6.03(b)
|
Specified Acquisition Action
|
|
§ 6.03(b)
|
Stockholder Approval
|
|
§ 3.18(b)
|
Superior Proposal
|
|
§ 6.03(d)(ii)
|
Surviving Corporation
|
|
§ 1.01
|
Tax or Taxes
|
|
§ 3.14(i)(i)
|
Tax Returns
|
|
§ 3.14(i)(ii)
|
Termination Date
|
|
§ 8.01
|
Transactions
|
|
§ 3.01(a)
|
Voting Company Debt
|
|
§ 3.03(b)
|
(c) When a reference is made in this Agreement to Sections,
Schedules or Exhibits, such reference shall be to a Section,
Schedule or Exhibit of this Agreement, respectively, unless
otherwise indicated. Whenever the words include,
includes or including are used in this
Agreement, they shall be deemed to be followed by the words
without limitation. The words hereof,
herein and hereunder and words of
similar import when used in this Agreement shall refer to this
Agreement as a whole and not any particular provision of this
Agreement. The term or is not exclusive. The
definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms. References
to a person are also to its permitted successors and assigns.
Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms.
Section
9.04
Severability
.
If
any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of Law, or
public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so
long as the economic or legal substance of the Transactions is
not affected in any manner materially adverse to any party. Upon
such determination that any
A-34
term or other provision is invalid, illegal or incapable of
being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of
the parties as closely as possible in a mutually acceptable
manner in order that the Transactions be consummated as
originally contemplated to the fullest extent possible.
Section
9.05
Disclaimer
of Other Representations and
Warranties
.
Parent, Merger Sub and the
Company each acknowledges and agrees that, except for the
representations and warranties expressly set forth in this
Agreement (a) no party makes, and has not made, any
representations or warranties relating to itself or its
businesses or otherwise in connection with the Transactions,
(b) no person has been authorized by any party to make any
representation or warranty relating to such party or its
businesses or otherwise in connection with the Transactions and,
if made, such representation or warranty must not be relied upon
as having been authorized by such party, and (c) any
estimates, projections, predictions, data, financial
information, memoranda, presentations or any other materials or
information provided or addressed to any party or any of its
Representatives are not and shall not be deemed to be or to
include representations or warranties unless any such materials
or information is the subject of any representation or warranty
set forth in this Agreement.
Section
9.06
Entire
Agreement; Assignment
.
This Agreement and the
Confidentiality Agreement constitute the entire agreement among
the parties hereto with respect to the subject matter hereof and
thereof and supersede all prior agreements and undertakings,
both written and oral, among the parties hereto, or any of them,
with respect to the subject matter hereof and thereof. This
Agreement shall not be assigned (whether pursuant to a merger,
by operation of law or otherwise), except that Parent and Merger
Sub may assign all or any of their rights and obligations
hereunder to any direct or indirect wholly owned Subsidiary of
Parent;
provided, however
, that no such assignment shall
relieve the assigning party of its obligations hereunder if such
assignee does not perform such obligations.
Section
9.07
Parties
in Interest
.
This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and
nothing in this Agreement, express or implied, is intended to or
shall confer upon any other person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement,
other than Section 6.04 (which is intended to be for the
benefit of the persons covered thereby and may be enforced by
such persons) and except for the right of (i) the Company,
on behalf of the holders of equity interests in the Company, to
pursue damages (which the parties acknowledge and agree shall
not be limited to reimbursement of expenses or
out-of-pocket
costs, and may include claims for damages based on the
consideration that would have otherwise been payable to the
stockholders of the Company and other relevant matters,
including other combination opportunities and the time value of
money), which shall be deemed in such event to be damages of
holders of equity interests in the Company, in the event of a
failure by Parent or Merger Sub to consummate the Merger as
required by this Agreement, which right is hereby acknowledged
and agreed by Parent and Merger Sub and (ii) Parent to
pursue damages (which the parties acknowledge and agree shall
not be limited to reimbursement of expenses or
out-of-pocket
costs, and may include claims for damages based on the synergies
and other benefits that would have otherwise accrued to Parent
and other relevant matters), which shall be deemed in such event
to be damages of holders of equity interests in Parent, in the
event of a failure by the Company to consummate the Merger as
required by this Agreement, which right is hereby acknowledged
and agreed by the Company. For purposes of this Agreement, any
action of the Special Committee shall be binding upon and shall
constitute an act of the Company.
Section
9.08
Remedies;
Specific Performance; Expenses
.
The parties
hereto acknowledge and agree that the parties would be
irreparably damaged if any of the provisions of this Agreement
are not performed in accordance with their specific terms or are
otherwise breached and that any non-performance or breach of
this Agreement by any party hereto could not be adequately
compensated by monetary damages alone and that the parties
hereto would not have any adequate remedy at law. Accordingly,
in addition to any other right or remedy to which each party may
be entitled, at law or in equity (including monetary damages),
such party shall be entitled to enforce any provision of this
Agreement by a decree of specific performance and to temporary,
preliminary and permanent injunctive relief to prevent breaches
or threatened breaches of any of the provisions of this
Agreement without posting any bond or other undertaking.
Notwithstanding anything to the contrary in this Agreement, all
Expenses of the Company, Parent and Merger Sub incurred in
connection
A-35
with any Action brought by the Company, Parent or Merger Sub
relating to the terms and provisions of this Agreement provided
for in the foregoing sentence shall be paid by the Company in
the event that Parent is successful on the merits in such Action
and shall be paid by Parent in the event that the Company is
successful on the merits in such Action.
Section
9.09
Governing
Law
.
This Agreement shall be governed by, and
construed in accordance with, the Laws of the State of Delaware
applicable to contracts executed in and to be performed in that
State. All Actions arising out of or relating to this Agreement
shall be heard and determined exclusively in the Delaware Court
of Chancery (or any proper appellate court thereof). The parties
hereto hereby (a) submit to the exclusive jurisdiction of
the Delaware Court of Chancery for the purpose of any Action
arising out of or relating to this Agreement brought by any
party hereto, and (b) irrevocably waive, and agree not to
assert by way of motion, defense, or otherwise, in any such
Action, any claim that it is not subject personally to the
jurisdiction of the courts described above, that its property is
exempt or immune from attachment or execution, that the Action
is brought in an inconvenient forum, that the venue of the
Action is improper, or that this Agreement or the Transactions
may not be enforced in or by the courts described above.
Section
9.10
Waiver
of Jury Trial
.
Each of the parties hereto
hereby waives to the fullest extent permitted by applicable Law
any right it may have to a trial by jury with respect to any
litigation directly or indirectly arising out of, under or in
connection with this Agreement or the Transactions. Each of the
parties hereto (a) certifies that no representative, agent
or attorney of any other party has represented, expressly or
otherwise, that such other party would not, in the event of
litigation, seek to enforce that foregoing waiver and
(b) acknowledges that it and the other parties hereto have
been induced to enter into this Agreement and the Transactions,
as applicable, by, among other things, the mutual waivers and
certifications in this Section 9.10.
Section
9.11
Amendment
.
This
Agreement may be amended by the parties hereto by action taken
by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time;
provided
,
however
, that, after the adoption of this Agreement and
the Transactions by the stockholders of the Company, no
amendment shall be made except as allowed under applicable Law.
This Agreement may not be amended except by an instrument in
writing signed by each of the parties hereto.
Section
9.12
Waiver
.
At
any time prior to the Effective Time, any party hereto may
(a) extend the time for the performance of any obligation
or other act of any other party hereto, (b) waive any
inaccuracy in the representations and warranties of any other
party contained herein or in any document delivered pursuant
hereto, and (c) waive compliance with any agreement of any
other party or any condition to its own obligations contained
herein. Any such extension or waiver shall be valid if set forth
in an instrument in writing signed by the party or parties to be
bound thereby. The failure of any party to assert any of its
rights under this Agreement or otherwise shall not constitute a
waiver of those rights.
Section
9.13
Headings
.
The
descriptive headings contained in this Agreement are included
for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement.
Section
9.14
Counterparts
.
This
Agreement may be executed and delivered (including by facsimile
transmission) in two or more counterparts, and by the different
parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]
A-36
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have
caused this Agreement to be executed as of the date first
written above by their respective officers thereunto duly
authorized.
PSYCHIATRIC SOLUTIONS, INC.
Name: Joey A. Jacobs
|
|
|
|
Title:
|
Chairman, President and Chief Executive Officer
|
UNIVERSAL HEALTH SERVICES, INC.
Name: Steve Filton
|
|
|
|
Title:
|
Senior Vice President and Chief Financial Officer
|
OLYMPUS ACQUISITION CORP.
Name: Steve Filton
A-37
ANNEX B
PERSONAL
AND CONFIDENTIAL
May 16, 2010
Special Committee of the Board of Directors
Psychiatric Solutions, Inc.
6640 Carothers Parkway, Suite 500
Franklin, TN 37067
Gentlemen:
You have requested our opinion as to the fairness from a
financial point of view to the holders (other than Universal
Health Services, Inc. (Parent) and its affiliates)
of the outstanding shares of common stock, par value $0.01 per
share (the Shares), of Psychiatric Solutions, Inc.
(the Company) of the $33.75 per Share in cash to be
paid to such holders pursuant to the Agreement and Plan of
Merger, dated as of May 16, 2010 (the
Agreement), by and among Parent, Olympus Acquisition
Corp., a wholly owned subsidiary of Parent, and the Company.
Goldman, Sachs & Co. and its affiliates are engaged in
investment banking and financial advisory services, commercial
banking, securities trading, investment management, principal
investment, financial planning, benefits counseling, risk
management, hedging, financing, brokerage activities and other
financial and non-financial activities and services for various
persons and entities. In the ordinary course of these activities
and services, Goldman, Sachs & Co. and its affiliates
may at any time make or hold long or short positions and
investments, as well as actively trade or effect transactions,
in the equity, debt and other securities (or related derivative
securities) and financial instruments (including bank loans and
other obligations) of third parties, the Company, Parent and any
of their respective affiliates or any currency or commodity that
may be involved in the transaction contemplated by the Agreement
(the Transaction) for their own account and for the
accounts of their customers. We have acted as financial advisor
to the Special Committee of the Board of Directors of the
Company (the Special Committee) in connection with,
and have participated in certain of the negotiations leading to,
the Transaction. We expect to receive fees for our services in
connection with the Transaction, the principal portion of which
is contingent upon consummation of the Transaction, and the
Company has agreed to reimburse our expenses arising, and
indemnify us against certain liabilities that may arise, out of
our engagement. We have provided certain investment banking and
other financial services to Parent and its affiliates from time
to time for which our investment banking division has received,
and may receive, compensation, including having acted as
co-manager with respect to Parents offering of
7.125% Notes due 2016 (aggregate principal amount
$150,000,000) in May 2008. We also may provide investment
banking and other financial services to the Company and Parent
and their respective affiliates in the future for which our
investment banking division may receive compensation.
In connection with this opinion, we have reviewed, among other
things, the Agreement; annual reports to stockholders and Annual
Reports on
Form 10-K
of the Company for the five fiscal years ended December 31,
2009; certain interim reports to stockholders and Quarterly
Reports on
Form 10-Q
of the Company; certain other communications from the Company to
its stockholders; certain publicly available research analyst
reports for the Company; and certain internal operating
forecasts for the Company prepared by its management (the
Operating Forecasts) and capital structure
assumptions provided by the Special Committee, each as approved
for our use by the Special Committee. We have also held
discussions with members of the senior management of the Company
regarding their assessment of the past and current business
operations, financial condition and future prospects of the
Company; reviewed the reported price and trading activity for
the Shares; compared certain financial and stock market
information for the Company with similar information for certain
other companies the securities of which are publicly traded;
reviewed the financial terms of certain recent business
combinations in the behavioral health industry specifically and
in other industries generally; and performed such other studies
and analyses, and considered such other factors, as we deemed
appropriate.
B-1
Special Committee of the Board of Directors
Psychiatric Solutions, Inc.
May 16, 2010
Page Two
For purposes of rendering this opinion, we have relied upon and
assumed, without assuming any responsibility for independent
verification, the accuracy and completeness of all of the
financial, legal, regulatory, tax, accounting and other
information provided to, discussed with or reviewed by us, and
we do not assume any responsibility for any such information. In
that regard, we have assumed with your consent that the
Operating Forecasts have been reasonably prepared on a basis
reflecting the best currently available estimates and judgments
of the management of the Company. We have not made an
independent evaluation or appraisal of the assets and
liabilities (including any contingent, derivative or other
off-balance-sheet assets and liabilities) of the Company or any
of its subsidiaries and we have not been furnished with any such
evaluation or appraisal. We have assumed that all governmental,
regulatory or other consents and approvals necessary for the
consummation of the Transaction will be obtained without any
adverse effect on the expected benefits of the Transaction in
any way meaningful to our analysis. We also have assumed that
the Transaction will be consummated on the terms set forth in
the Agreement, without the waiver or modification of any term or
condition the effect of which would be in any way meaningful to
our analysis.
Our opinion does not address the underlying business decision of
the Company to engage in the Transaction, or the relative merits
of the Transaction as compared to any strategic alternatives
that may be available to the Company; nor does it address any
legal, regulatory, tax or accounting matters. This opinion
addresses only the fairness from a financial point of view, as
of the date hereof, of the $33.75 per Share in cash to be paid
to the holders (other than Parent and its affiliates) of Shares
pursuant to the Agreement. We do not express any view on, and
our opinion does not address, any other term or aspect of the
Agreement or Transaction or any term or aspect of any other
agreement or instrument contemplated by the Agreement or entered
into or amended in connection with the Transaction, including,
without limitation, the fairness of the Transaction to, or any
consideration received in connection therewith by, the holders
of any other class of securities, creditors, or other
constituencies of the Company; nor as to the fairness of the
amount or nature of any compensation to be paid or payable to
any of the officers, directors or employees of the Company or
class of such persons, in connection with the Transaction,
whether relative to the $33.75 per Share in cash to be paid to
the holders (other than Parent and its affiliates) of Shares
pursuant to the Agreement or otherwise.
We are not expressing any opinion as to the impact of the
Transaction on the solvency or viability of the Company or
Parent or the ability of the Company or Parent to pay its
obligations when they come due. Our opinion does not address any
legal, regulatory, tax or accounting matters. Our opinion is
necessarily based on economic, monetary, market and other
conditions as in effect on, and the information made available
to us as of, the date hereof and we assume no responsibility for
updating, revising or reaffirming this opinion based on
circumstances, developments or events occurring after the date
hereof. Our advisory services and the opinion expressed herein
are provided for the information and assistance of the Special
Committee in connection with its consideration of the
Transaction and such opinion does not constitute a
recommendation as to how any holder of Shares should vote with
respect to such Transaction or any other matter. This opinion
has been approved by a fairness committee of Goldman,
Sachs & Co.
Based upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the $33.75 per Share in cash to be paid
to the holders (other than Parent and its affiliates) of Shares
pursuant to the Agreement is fair from a financial point of view
to such holders.
Very truly yours,
(GOLDMAN, SACHS & CO.)
B-2
ANNEX C
Section 262
of the General Corporation Law of the State of
Delaware
§
262. Appraisal rights.
(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to
such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor
consented thereto in writing pursuant to § 228 of this
title shall be entitled to an appraisal by the Court of Chancery
of the fair value of the stockholders shares of stock
under the circumstances described in subsections (b) and
(c) of this section. As used in this section, the word
stockholder means a holder of record of stock in a
stock corporation and also a member of record of a nonstock
corporation; the words stock and share
mean and include what is ordinarily meant by those words and
also membership or membership interest of a member of a nonstock
corporation; and the words depository receipt mean a
receipt or other instrument issued by a depository representing
an interest in one or more shares, or fractions thereof, solely
of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available for the shares of
any class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to
§ 251 (other than a merger effected pursuant to
§ 251(g) of this title), § 252,
§ 254, § 257, § 258,
§ 263 or § 264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series
of stock, which stock, or depository receipts in respect
thereof, at the record date fixed to determine the stockholders
entitled to receive notice of the meeting of stockholders to act
upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or
(ii) held of record by more than 2,000 holders; and further
provided that no appraisal rights shall be available for any
shares of stock of the constituent corporation surviving a
merger if the merger did not require for its approval the vote
of the stockholders of the surviving corporation as provided in
§ 251(f) of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the
shares of any class or series of stock of a constituent
corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to
§§ 251, 252, 254, 257, 258, 263 and 264 of this
title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or
depository receipts in respect thereof) or depository receipts
at the effective date of the merger or consolidation will be
either listed on a national securities exchange or held of
record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under § 253 of
this title is not owned by the parent corporation immediately
prior to the merger, appraisal rights shall be available for the
shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as
a result of an amendment to its certificate of incorporation,
any merger or consolidation in which the corporation is a
constituent corporation or the sale
C-1
of all or substantially all of the assets of the corporation. If
the certificate of incorporation contains such a provision, the
procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply
as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be
submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record
date for notice of such meeting with respect to shares for which
appraisal rights are available pursuant to subsection (b)
or (c) hereof that appraisal rights are available for any
or all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholders
shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for
appraisal of such stockholders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such stockholders
shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as
herein provided. Within 10 days after the effective date of
such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of
the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to
§ 228 or § 253 of this title, then either a
constituent corporation before the effective date of the merger
or consolidation or the surviving or resulting corporation
within 10 days thereafter shall notify each of the holders
of any class or series of stock of such constituent corporation
who are entitled to appraisal rights of the approval of the
merger or consolidation and that appraisal rights are available
for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy
of this section. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also
notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may,
within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation
the appraisal of such holders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such holders shares. If
such notice did not notify stockholders of the effective date of
the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of
the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second
notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder
who is entitled to appraisal rights and who has demanded
appraisal of such holders shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary
or of the transfer agent of the corporation that is required to
give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated
therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix,
in advance, a record date that shall be not more than
10 days prior to the date the notice is given, provided,
that if the notice is given on or after the effective date of
the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is
given prior to the effective date, the record date shall be the
close of business on the day next preceding the day on which the
notice is given.
(e) Within 120 days after the effective date of the
merger or consolidation, the surviving or resulting corporation
or any stockholder who has complied with subsections (a)
and (d) of this section hereof and who is otherwise
entitled to appraisal rights, may commence an appraisal
proceeding by filing a petition in the Court of Chancery
demanding a determination of the value of the stock of all such
stockholders.
C-2
Notwithstanding the foregoing, at any time within 60 days
after the effective date of the merger or consolidation, any
stockholder who has not commenced an appraisal proceeding or
joined that proceeding as a named party shall have the right to
withdraw such stockholders demand for appraisal and to
accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) of this
section hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate
number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholders
written request for such a statement is received by the
surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal
under subsection (d) of this section hereof, whichever is
later. Notwithstanding subsection (a) of this section, a
person who is the beneficial owner of shares of such stock held
either in a voting trust or by a nominee on behalf of such
person may, in such persons own name, file a petition or
request from the corporation the statement described in this
subsection.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after
such service file in the office of the Register in Chancery in
which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the
value of their shares have not been reached by the surviving or
resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the
time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting
corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1
or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the
City of Wilmington, Delaware or such publication as the Court
deems advisable. The forms of the notices by mail and by
publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall
determine the stockholders who have complied with this section
and who have become entitled to appraisal rights. The Court may
require the stockholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal
proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After the Court determines the stockholders entitled to
an appraisal, the appraisal proceeding shall be conducted in
accordance with the rules of the Court of Chancery, including
any rules specifically governing appraisal proceedings. Through
such proceeding the Court shall determine the fair value of the
shares exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation,
together with interest, if any, to be paid upon the amount
determined to be the fair value. In determining such fair value,
the Court shall take into account all relevant factors. Unless
the Court in its discretion determines otherwise for good cause
shown, interest from the effective date of the merger through
the date of payment of the judgment shall be compounded
quarterly and shall accrue at 5% over the Federal Reserve
discount rate (including any surcharge) as established from time
to time during the period between the effective date of the
merger and the date of payment of the judgment. Upon application
by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court
may, in its discretion, proceed to trial upon the appraisal
prior to the final determination of the stockholders entitled to
an appraisal. Any stockholder whose name appears on the list
filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted such
stockholders certificates of
C-3
stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal
rights under this section.
(i) The Court shall direct the payment of the fair value of
the shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Payment shall be so made to each such stockholder, in the case
of holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender
to the corporation of the certificates representing such stock.
The Courts decree may be enforced as other decrees in the
Court of Chancery may be enforced, whether such surviving or
resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in
the circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys fees
and the fees and expenses of experts, to be charged pro rata
against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights
as provided in subsection (d) of this section shall be
entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition
for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a
written withdrawal of such stockholders demand for an
appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the
merger or consolidation as provided in subsection (e) of
this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval
may be conditioned upon such terms as the Court deems just;
provided, however that this provision shall not affect the right
of any stockholder who has not commenced an appraisal proceeding
or joined that proceeding as a named party to withdraw such
stockholders demand for appraisal and to accept the terms
offered upon the merger or consolidation within 60 days
after the effective date of the merger or consolidation, as set
forth in subsection (e) of this section.
(l) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the
surviving or resulting corporation.
C-4
[PRELIMINARY FORM OF PROXY CARD]
6640
CAROTHERS PARKWAY
SUITE 500
FRANKLIN, TN 37067
VOTE BY INTERNET [WEBSITE]
Use the Internet to transmit your voting
instructions and for electronic delivery of
information up until 11:59 P.M. Eastern Time the
day before the special meeting date. Have your
proxy card in hand when you access the web site and
follow the instructions to obtain your records and
to create an electronic voting instruction form.
VOTE BY PHONE [TOLL-FREE NUMBER]
Use any touch-tone telephone to transmit your voting
instructions up until 11:59 P.M. Eastern Time the day
before the meeting date. Have your proxy card in hand
when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in
the enclosed postage-paid envelope we have provided or
return it to Psychiatric Solutions, Inc., c/o [ADDRESS].
If you vote by telephone or Internet, please do not
mail your Proxy Card.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS
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KEEP THIS PORTION FOR YOUR RECORDS
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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DETACH AND RETURN THIS PORTION ONLY
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The Board of Directors recommends you vote FOR the following proposals:
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(1) To consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of May 16, 2010, by and among Psychiatric
Solutions, Inc., a Delaware corporation, Universal Health Services, Inc., a Delaware corporation (UHS), and Olympus Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of UHS, as the merger agreement may be amended from time to time.
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For
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Against
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Abstain
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(
2) To approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at
the time of the special meeting to adopt the merger agreement.
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Yes
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No
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Please indicate if you plan to attend this meeting
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Please sign exactly as your name(s) appear(s) hereon.
When signing as attorney, executor, administrator, or other
fiduciary, please give full title as such. Joint owners
should each sign personally. All holders must sign. If a
corporation or partnership, please sign in full corporate
or partnership name, by authorized officer.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date
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PSYCHIATRIC SOLUTIONS, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
[
], 2010
The undersigned hereby appoints Brent Turner and Christopher L. Howard, or either of them, with
full power of substitution and
resubstitution, as proxies to vote all shares of common stock of Psychiatric Solutions, Inc. (the
Company) that the undersigned is entitled to vote at the Special Meeting of Stockholders of the
Company (the Special Meeting) to be held at our corporate headquarters located at 6640 Carothers
Parkway, Suite 500, Franklin, Tennessee 37067, on [
], [
], 2010, at [
][
]. m. (Central Time), and
at any adjournment thereof, on the matters indicated on the reverse side and such other business as
may properly come before the Special Meeting.
This Proxy is being solicited by the Companys Board of Directors and, when properly executed,
will be voted as specified. If not
otherwise specified, the above named proxies will vote (a) FOR a proposal to adopt the Agreement
and Plan of Merger (the merger agreement), dated as of May 16, 2010, by and among the Company,
Universal Health Services, Inc., a Delaware corporation (UHS), and Olympus Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of UHS, as the merger agreement may be amended
from time to time, (b) FOR the adjournment of the Special Meeting, if necessary or appropriate, to
solicit additional proxies if there are insufficient votes at the time of the Special Meeting to
adopt the merger agreement and (c) in accordance with the recommendation of the Board of Directors
on any other proposal that may properly come before the Special Meeting or any adjournment thereof.
Continued and to be signed on reverse side
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